Factors affecting the buy vs build decision in large Australian organisations

When developing an information system, organisations are faced with a fundamental choice: to buy a pre-developed package (potentially customise it or redesign/reengineer the business processes of the company concerned to fit the package), or to build the system in-house. Past literature has indicated the importance of the buy vs build decision to the organisation even suggesting that correctly managing the choice could be the key to managing IT. This research aims to identify the factors that an organisation should consider when making an information systems buy vs build decision. Interviews were conducted with 10 organisations across a spread of industries, involving key strategic IT decision-making personnel at the senior IT executive level. By examining the operational approaches adopted in each of these organisations and the key drivers behind these approaches, we identify the core factors that affect real-world buy vs build decisions in large Australian organisations with a turnover in excess of $750 million. We found that a number of core factors – strategy, commodity and competitive advantage, maturity, cost and requirements fit – critically affect buy vs build, while peripheral factors – risk, time and timing, political factors, and ongoing support – are secondary considerations. Journal of Information Technology (2008) 23, 118–131. doi:10.1057/palgrave.jit.2000098 Published online 15 May 2007