Build vs Buy: Deciding between building internally or relying on a technology partner

For a CTO or Chief Operating Officer who leads an internal development team, the decision between developing a solution with their own resources or turning to an external vendor is recurrent and strategic. It is not always analyzed with the level of rigor it requires, and a wrong choice can have a significant impact on time, cost and organizational focus.

This guide is a structured analysis framework to approach this decision more objectively, incorporating a complete view of the total cost of ownership (TCO) and the contexts in which each alternative may be more appropriate.

A real dilemma: too many priorities competing for the same team

If you're a CTO or Chief Operating Officer, you're probably managing high-impact initiatives: infrastructure modernization, critical integrations, system stability, cybersecurity, platform scalability, or strategic projects linked to growth.

At the same time, different areas of the business - Human Resources, Finance, Commercial, Customer Service, Logistics - are beginning to need internal tools to resolve very specific daily frictions. Every request is reasonable. Every team has strong arguments. But together, they create continuous pressure on a capacity that is not infinite.

The technical team prioritizes the structural and the critical. Operations prioritize what unlocks immediate efficiency. Business wants speed. And, in the meantime, some internal tools promised months ago are still not materialized.

Strategic projects absorb most of the available resources, incidents fill sprints, and operational improvement initiatives are delayed time and time again. The CEO talks about competitive advances. And the CFO asks about the real cost of each option.

In this context, the build vs buy decision is rarely made solely on technical criteria. Strategic, organizational, financial and even cultural factors are mixed.

The Decision Framework: A Three-Dimensional Matrix

We know that in practice these types of decisions are not binary or simple. However, to provide clarity as much as possible, we have simplified the build vs buy framework into three fundamental questions.

The combination of answers can place your project in one of nine possible scenarios and guide the most reasonable recommendation.

1) Is it really a differentiating competitive advantage?

The question isn't whether the process is important - almost everyone is - but whether the way you execute it sets you apart from the competition.

A billing process is necessary, but not differentiating: all companies invoice.
A proprietary credit risk scoring algorithm, on the other hand, can be a clear competitive advantage.

If it's core and differentiator → Build.
If it isn't → Buy or Consult usually make more sense.

2) Are there mature solutions in the market?

If there are several specialized suppliers, with solid references and experience in your sector, developing from scratch involves a high opportunity cost. If, on the other hand, the market offers solutions that are too generic or immature for your use case, then Build or Consult become more reasonable options.

In this regard, the ecosystem of available tools has evolved considerably. Gartner predicts that by 2026 75% of new business applications will be developed with low-code technologies^[2]

YForrester estimates that 87% of enterprise developers already use these platforms for at least part of their work. This expands the “buy or consult” space for internal tools that until recently required custom development.^[3]

3) Do you have real internal capacity within the time frame that the business needs?

From our perspective, this is what we consider, by far, to be the most underestimated dimension. Real capacity does not mean “we have engineers”, but rather net available capacity after discounting maintenance, incidents, support, meetings and other commitments.

And the relevant time frame is not the one that would be realistic for IT, but the one that the business needs to capture value.

This distinction is more relevant than it seems. According to McKinsey and Oxford University analysis of more than 5,400 large scale IT projects, projects that last longer than expected generate cost overruns of 45% on average over the initial budget and deliver 56% less value than expected.^[1]

When it might make sense to build internally

Building a solution with your own equipment may be the right option in certain contexts. In our experience, it usually fits best when several conditions are met at the same time:

• The process has a clearly differentiating or strategic component.
• There is real and available internal capacity (not just in theory).
• The business term allows for longer development.
• The organization is willing to take on medium-term maintenance.

In midsize companies, this isn't always the norm, but it's not exceptional either. It depends a lot on when the company is in place.

An approximation of the total cost in the first year

Beyond the direct cost of development, total cost of ownership (TCO) should be considered, including:

• Time spent by the internal team.
• Employer cost.
• Infrastructure and tools.
• Testing and deployment.
• Documentation and training.
• Opportunity cost (projects that are not being done).

In projects of medium complexity, these items can place the investment of the first year in a range of approximately six figures, depending on the team involved and the actual scope.

As a reference, the total cost to the employer of a mid-level developer in Spain is around 49,000 €/year, and in Western Europe between 80,000 and 100,000 €/year. A team of 3-4 developers for 12-18 months can represent between 300,000 and 600,000€ in personnel costs alone, before including infrastructure or training.^[5]

In addition, subsequent maintenance usually represents a significant percentage of the initial cost each year. It is not always included in the initial calculations, but it should be taken into account.

When it might make sense to outsource or rely on a specialized partner

Working with a specialized consultancy firm or adopting an existing solution presents a different cost structure: lower initial investment, greater predictability of deadlines and, in many cases, maintenance already defined from the start.

In projects of medium complexity, the initial cost is usually significantly lower than that of a full internal development, although it will vary depending on scope, integrations and technical requirements.

Beyond the cost, the difference is usually in:

• The speed of execution.
• The experience accumulated in similar projects.
• Reducing the risk associated with the learning curve.

It is logical to infer that an external team that has built similar solutions several times makes fewer mistakes than one that addresses them for the first time. This in no case invalidates the internal team; it simply reflects the difference between a highly segmented or specialized experience and a more generalist capacity.

The opposite risk is also worth mentioning: when internal tool needs are not resolved quickly enough, teams tend to seek solutions on their own. According to Gartner, shadow IT now represents between 30% and 40% of the total IT spending of large companies, and it is estimated that 41% of employees already acquire or create technology without the knowledge of the IT department.^[4]

Comparing to three years: more than numbers

Three-year comparisons may show significant differences in cumulative investment. However, more important than the final figure is to understand:

• What flexibility do you need.
• What level of control you want to maintain.
• How much value does time earned generate.
• What other projects could be implemented if you free up internal capacity.

In many cases, the decision is not purely economic, but strategic.

The hybrid model: a common alternative

In medium-sized companies, often the best solution is not one extreme or the other, but rather a combination.

Outsourcing initial construction can help gain speed and specialization, while ensuring:

• Ownership of the code and architecture
• Use of open or widely adopted technologies.
• Transfer of knowledge to the internal team.

In parallel, the internal IT team can remain focused on core tools and critical business systems, while part of the backlog of internal tools - which often accumulate and is not always a priority - can be progressively resolved through no-code or low-code solutions.

This approach allows for progress on small operational issues without burdening the technical team, while maintaining it's focus on strategic developments.

In this way, the organization captures speed in the short term without losing technological autonomy in the long term.

It's not a universal formula, but in our experience it tends to balance speed, control and sustainability well.

Before Deciding

Before choosing an option, we recommend carrying out a full analysis with real company data. Generic estimates can vary considerably depending on the technical context, the organizational moment and the level of ambition of the project.

The decision should not be ideological (“always build” or “always outsource”), but contextual.

Notes

[1] Bloch, M., Blumberg, S., & Laartz, J. (2012). Delivering large-scale ITProjects on time, on budget, and on value. McKinsey & Company. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/delivering-large-scale-it-projects-on-time-on-budget-and-on-value

[2] Gartner. (2021). Forecast Analysis: Low-Code Development Technologies, Worldwide. Gartner Research. https://www.gartner.com/en/documents/7146430

[3] Forrester Research. (2025). The State of Low-Code, Global 2025. ForresterReports. https://www.forrester.com/blogs/the-low-code-market-could-approach-50-billion-by-2028/

[4] Gartner. (2023). How to Manage Shadow IT Risk While Enabling BusinessInnovation. Gartner Research. https://www.gartner.com/en/information-technology/insights/shadow-it

[5] Boundless. (2025). The cost of hiring software developers in Europe 2025.Boundless HQ. https://boundlesshq.com/blog/how-much-it-costs-to-hire-a-software-developer-in-europe-2025/