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I am quite experienced in the field of Web Projects and I have a capital (500.000 $). "I am planning"\"I would like" to create a "great" Web site and I noticed that I have two choices:

  1. assign the work to a third party (ie: a Web agency);
  2. finding staff with which to design and implement the Web site;

What are the advantages and disadvantages (at economic and project level) in both cases?

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2 Answers

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Others may refer to this problem as the Make or Buy dilemma.

Assigning the work to a third party is your 'Buy' option, and finding staff and doing it in -house is your 'Make' option.

Make advantages:

  • You get what you want and it's done the way you want it
  • You gain knowledge about the internal workings of the product
  • You won't need to pay for features or development not required

Make disadvantages:

  • Time, cost, effort: you might have the budget but it's going to cost you time in finding the right people and managing them
  • You might not be able to find the right people with the desired level of experience and ability
  • You might not have enough internal capability to support the development and ongoing maintenance of the work

Buy advantages:

  • Possibly reduced time to implement, if the 3rd party has done something similar before and has a base product/system/process to work from
  • Possibly lower overall acquisition costs: less project management, human resource, and other 'overhead' costs that can come with hiring people
  • Higher application quality (hopefully the bugs have already been ironed out on previous work)
  • Reduced need for internal resources: so you can concentrate on your core business
  • Infusion of external expertise

Buy disadvantages:

  • Time needed to find and assess the 3rd party you want to work with
  • Initial and ongoing dependencies on the 3rd party
  • Risks due to lack of package knowledge of what is being handed to you
  • Risks due to process changes (either you or them)
  • Customizing of certain features may be difficult or impossible if the 3rd party is bringing in their platform
  • Possible communication, cultural or language difficulties if outsourcing to foreigners
  • Possible legal issues such as copyrights and IP ownership

One of the pieces of advice we follow, and teach our own customers is to outsource anything not in your core business that you can't make a profit on. Some people go further and suggest outsource everything outside your core business.

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What are the advantages and disadvantages (at economic and project level) in both cases?

1) assign the work to a third party (ie: a Web agency);

2) finding staff with which to design and implement the Web site;

I assume by "agency" you mean an outside company, a vendor, that will take complete responsibility for the project.

Advantages of using an external vendor:

  • Relieves you of staffing and project management responsibility (these are the two major reasons that companies outsource)
  • (Presumed) Proven technical and implementation expertise
  • Forces you to create a complete specification of the site and to make design decisions up-front - IE, imposes high discipline on the process automatically and makes you accountable up front

Disadvantages of using an external vendor:

  • The normal risks of outsourcing any project: vendor assigns less competent people than initially promised to your project, or the vendor has internal problems that lead to less than satisfactory performance.
  • Forces you to create a complete specification of the site and to make design decisions up-front (this was presented before as an advantage. The parallel disadvantage here is "early lock in" of your decisions which may be limiting.)
  • (as noted by Paul F.) communication difficulties are typical with all outsourcing, whether in-country or offshore

Advantages of developing internally:

  • Gives you complete control of the personnel selection process and the entire development cycle
  • Transparency - you know exactly what is happening at all times
  • Allows you to defer design decisions and to develop iteratively in close contact with the developers
  • Better communication than with outsourcing should be quite possible to achieve

Disadvantages:

  • The normal risks of staffing and selecting technical people
  • Allows you to defer design decisions - IE, less discipline upon you to make decisions as soon as possible
  • Iteration is very possible (easy, in fact, when developers are under your direct control) but can lead to spiraling cost and complexity

I see the issues of quality control and follow-on maintenance as being very separable from the buy or make decision. The vendor's output may well have better or worse quality than your hand picked people: some outsourcers do a terrific sales job to land a project and then fail to deliver quality; or they may run circles around the staff you would pick. The vendor may have better luck at maintenance and upgrades, or worse luck, than you will.

I see the whole make vs. buy equation as coming down to how much control and responsibility you want over the end result. With more control comes more responsibility for the final result.

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