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Build Or Buy? How Tech Startups Can Collaborate And Customise To Corner Success

19 Nov'23 | By Inc42 BrandLabs

As new technologies are emerging faster than our institutional prowess to adapt and integrate them, business leaders are often at a crossroads, wondering if they should build technology tools in-house or procure off-the-shelf solutions. This classic dilemma, which is now more relevant than ever, has the potential to shape the future of a tech company, impacting its efficiency, growth and ability to innovate.

Talking about current business models which are running successfully worldwide and those that worked well in the past, Saket Agarwal, founder and CEO of the Mumbai-based SaaS consulting company Onnivation, said, “If you look at McDonald’s, Boeing, Wells Fargo, most of the banks, or most of the companies which literally print money, you will be surprised to know that they don’t make anything themselves.”

Build-versus-buy has its pros and cons. Developing the software programme in-house guarantees a level of customisation that is well-aligned with an organisation’s needs. It will also be cost-effective in the long run as the company does not have to pay licensing fees. On the other hand, buying the software is a quick solution. It helps embed extensive domain knowledge and industry best practices that may exceed the capabilities of an in-house IT team. Therefore, companies today need to go hybrid, introducing a mix of best-in-class ready-made solutions and differentiated, custom-built offerings.

“If your core business is to sell burgers or planes, thousands of components will be involved. If you start backward integrating into everything, you risk diluting your expertise in your core business,” explained Agarwal.

Will Tech Collaboration Hurt Innovation, Integrity?

While the decision to collaborate with external entities presents a complex web of challenges and advantages, a fundamental question is at play: How does it impact the core value proposition of a tech company?

Interestingly, tech companies are expected to prioritise technology in their value proposition when responding to investors’ queries. Neither markets nor investors take kindly to the notion that a tech company may not have complete control of its intellectual property.

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Dhruvil Sanghvi, founder and CEO of the logistics SaaS startup LogiNext, also raised this concern. “If something critical on your platform is not controlled or developed by you, it is not your intellectual property in this new-age business scenario. It’s not really flying.”

Therein lies the paradox. Such collaborations can amplify the reach of a technology company, enhance products/services, or address market gaps. But they can also introduce elements beyond one’s control, diluting the company’s tech identity.

But that is not to say that partnerships should be shunned entirely. These can help scale up a tech business, gain entry to new markets and offer diverse solutions. The challenge lies in maintaining a delicate balance between collaboration and uniqueness.

Sanghvi delved deeper into the complex dynamics, especially in the Indian context. “Does this inclination to do everything in-house indicate where a company’s focus lies?” he queried.

“In India, there is a tendency to handle tasks internally rather than seeking external partners. It is partly due to a less mature vendor ecosystem and vendor relationships compared to other parts of the world,” he observed.

Agarwal of Onnivation drew an analogy between such business compulsion and the must-do of a skilled batsman. “Often, we hyper-optimise, focussing on our weaknesses. But if one is a great batsman, every minute he spends learning how to bowl [because he does not bowl well and considers this a weakness] is a minute lost when he could have become a better batsman.”

His perspective underscores a common trend within the startup ecosystem – the inclination to manage everything internally. This can lead to dwindling focus away from what should be a priority, a reluctance to delegate tasks and an unwillingness to relinquish control.

Eventually, it is all about walking the tightrope that requires purposeful navigation, a sense of unwavering priority and the capability to adapt. In essence, businesses must operate holistically in sync with the challenge and promise of a tech-driven future.

In this episode of the Masters Of SaaS series hosted by Inc42, watch Dhruvil Sanghvi of LoginNext in conversation with Saket Agarwal of Onnivation explore the delicate balance between autonomy, collaboration and innovation in a fast-evolving SaaS landscape.