Are you weighing options for implementing a new risk management platform for your energy trading operations in 2018? You may be considering developing proprietary software or looking at options available on the market. This means you face the build vs buy dilemma.
You may quickly feel like you are comparing apples to oranges, but we are here to help you understand the tradeoffs between these two options and decide which is the best choice for your company.
Here are the most important five questions to ask when deciding whether your firm should build a risk management platform (or spreadsheets) or buy an existing software platform.
What are your technical requirements: Do you want a lot of customization? Do you need 99.9999% uptime?
Do you use proprietary valuation calculations that are different from commonly used ones? (PS…. YOU DON’T.) Do you need or want extremely customized software that accommodates 100% of your deals? Do you expect your software to perform like it’s been lean/six sigma mega-optimized for efficiency?
Yes? Your two best options are to either build your own software platform or buy one of our legacy competitors. Then hire consultants. Then be prepared to spend millions (sometimes even billions -- you know who you are).
98% good enough? You have lots of great out-of-the-box options! These may run on Amazon Web Services or other true-cloud solutions, which is considered best-in-class technology.
How quickly do you want to use the software?
When it comes to the time required to implement a new software solution, not all solutions are created equal. You could be up and running in months, or you might be looking at a process spanning several years. Eek!!
2 years from now would be fine. Building would work. Or working with those costly consultants that will help set you up with a legacy vendor.
ASAP with as few hiccups and headaches as possible? Buy! You could be enjoying your new risk management platform in a few months.
How much budget can you allocate to this project?
Traditional IT-thought suggests that buying software is cheaper than building your own. However, this is not true if you buy a large, legacy vendor’s solutions. It is not cheaper. There are some infamous implementations that cost over $20 million. 20 million eeks!!
We have about $20 million to invest. Yup - building or buying a legacy option could be the way to go.
Why do we have to pay outrageous hidden prices to get setup on software we’re buying? We agree. That’s why we’re always upfront with you about any implementation costs.There is a strong off-the-shelf option for you.
How big is your company?
The size of your company influences how many deals you track and how many people need access to the system. This increases the complexity of what needs to be tracked and what functionality is “enough” for your team.
Giant - Build or buy...
A Giant in Spirit but not in Numbers - Buy!
Does your IT department have extensive experience managing large, custom software projects?
Yes? Then your team could potentially build this out for you.
No? Don’t risk bad software. Buy a great option.
But, don’t buy legacy…
Honestly, if you decide that buying is the right path for you, don’t buy a legacy software product. You’ll end up hiring consultants anyway. Implementing their product, which inevitably will not meet 100% of your needs will cost just as much and take just as long (if not cost more and take longer) than simply building the perfect solution for your own organization. If you’re as unique as a snowflake and need a solution that reflects that, go be a snowflake and build your snowflake software.
Did you find out that you fall on the buying end of the spectrum? Get in touch with our team to discuss what options are available and would be best for your company.
Updated January 24, 2023