To Build or To Buy, That Is the Question

Since I started developing software professionally in 1983, the build or buy question has been part of my business. “Off-the-Shelf or Custom Programming” was the original hurdle for me to cross to make a sale. These days it is the “In-source or Out-source” of a mission critical service question.

Yesterday I had a lengthy discussion about this with our industry analyst, Alan Wilensky. The brain storming session was about how we look at Build/Buy in-house for our own needs and what we pitch to the market; and how can do this without looking like hypocrites.

One of the questions that Alan and I came up with to help determine the answer is, “Am I using the service myself, or am I providing it to others?” Another way to look at it is, “Am I buying raw services and adding value?” If you are using the service yourself or taking the raw service and adding value to it, then strongly consider out-sourcing that portion and in-sourcing the part where you add the value.

Borrowing from Geoffrey Moore’s book Living on the Fault Line one out-sources tasks that are “context” and in-source those that are “core.” With out going into deep discussion (I highly recommend all his books), the key is whether or not the service gives you product differentiation in the market. If it does (core), in-source; if it does not (context), out-source. Moore goes to great lengths to say that it might be a critical component and may have to be done very well, but if it is “context” then out-source it.

Let me lift Loren Data’s skirt up a bit and let you know about how we approach things in house. For software development and system processes we use extremely few third-party applications and libraries outside the operating system and the development environment (Windows 2008 and Visual Studio 2008, predominately). As a 24x7x365 mission-critical operation, we feel it is imperative to have the absolute most control over our code-base, with the fewest outside influences, in order to provide the quick response our clients demand.

We out-source collocation services, Internet services, phone services, etc. We in-source our call center, network operations and code development.  We add value to service we purchase with the tasks we keep in-house.

I can tell you that this methodology has delivered incredibly stable systems with stellar up-time performance over the last decade that ECGrid has been in operation. Even back when we were on Windows NT and Windows 2000 and no one thought those operating systems were ready for prime time, we almost never saw a computer go down. We observed servers running for years without failures, with the only resets being done for security patches. I attribute this to minimizing third-party applications on these mission critical machines and keeping them as pure Microsoft as possible.

So back to our customers and the conundrum, do we In-Source or Out-Source. While there are many factors in the In/Out decision, one of them is where on the IT Service “stack” your organization lies. At the top is the non-technical end-user. They are not going to build anything; they are going to buy everything. At the lowest levels are the infrastructure players.

We provided value-add to EDI Routing and Interconnect Management for EDI Service Providers. All our services, ECGridOS API and network operations protocols are designed specifically for supporting the Service Providers. We are the Out-Sourced NetOps Department (on steroids).

Our clients buy our EDI Routing and Interconnect Management for themselves (instead of building their own). What they sell to their customers are a whole host of Value-Added Services: Mapping & Translation, Trading Partner Management, System Integration, Alerts, Reports, Carbon Copies, the list goes on and on.

The initial concern that our new, particularly larger, prospective clients have is: Is Loren Data big enough to service their needs? Can we support their 24x7x365 mission critical application for their tens of thousands of customers? Are we reliable?

How we respond to this question is to first meet them where they are. We empathize with their up-time needs. Positioned as their out-sourced NetOps Department, we meet or exceed what they would implement in-house for the same needs at a fraction of the cost. And unlike purchasing their services from a VAN (their competitor) our goals are aligned with our customers.

Furthermore, when it comes to Interconnects and a multiple service provider market, VANs cannot see the market the way we do. Their core is more closely related to our customers, providing Value Added to the end users. Interconnects are context to the VANs (whether they recognize this or not), even considered “necessary evils” as once quoted to me directly by a major VAN’s VP of Marketing.

What is truly key is that what is “context” to our customers is “core” to us. The fact that we provide EDI routing services specifically for numerous service providers, gives us a broad and unique perspective on what makes it work better for everyone.

All of this makes Loren Data special and uniquely qualified to handle this mission critical service for our customers; and for our customers, it makes them that much more competitive in the market.

Todd Gould
President
Loren Data Corp.

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