Make vs. Buy is a strategic decision framework closely related to build vs. buy but broader in scope, encompassing decisions about whether to perform technology-related activities internally (make) or outsource them to external providers (buy), including software development, infrastructure management, testing, security operations, and IT support.
Context for Technology Leaders
For CIOs, make vs. buy extends beyond software to encompass the full range of technology operations—infrastructure management, security operations, application support, testing, and specialized expertise. The decision framework evaluates whether internal execution or external sourcing delivers better value considering cost, quality, speed, risk, and strategic control factors.
Key Principles
- 1Core vs. Context: Activities that create competitive differentiation (core) should be made internally, while activities that are necessary but undifferentiated (context) are candidates for buying or outsourcing.
- 2Capability Assessment: Make decisions require honest assessment of internal capabilities, talent availability, and organizational readiness to deliver and maintain the capability at required quality levels.
- 3Sourcing Strategy: Modern sourcing strategies often combine make and buy—building core capabilities internally while outsourcing commodity functions to managed service providers or cloud platforms.
- 4Flexibility and Reversibility: Sourcing decisions should consider the ease of changing direction—how difficult would it be to bring an outsourced capability back in-house, or to outsource an internally developed one.
Strategic Implications for CIOs
CIOs should develop sourcing strategies that align technology make vs. buy decisions with business strategy, optimizing the balance of internal capability development and external service utilization. Enterprise architects should evaluate the architectural implications of sourcing decisions, particularly regarding integration, data flows, and security boundaries with external providers.
Common Misconception
A common misconception is that make vs. buy is primarily a cost decision. While cost is important, the most critical factors are strategic control over differentiating capabilities, quality of execution, speed of delivery, and organizational learning. Outsourcing core capabilities to save money often results in loss of competitive advantage.