POSITION PAPER

To build or buy: The productdevelopment conundrum
Advantages and disadvantages of licensing vs building
information management

Contents
Executive summary

3

Building or buying—an overview

4

Why an organization may decide to build4

Why an organization may decide to buy

6

Building or buying—making the right call

7

When to consider building—a checklist

8

Building or buying—current business environment conditions

8

Digital transformation

8

Globalization and remote working

8

The OpenText OEM Program

9Conclusion

To build or buy: The product development conundrum

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Most technology today operates at the cutting edge, where competition forexpertise, customers, solutions and public favor is fierce. Leaders need to keepahead of trends, such as digital transformation and remote work, while continuallydeveloping their product offering to ensure it remains relevant and solves
customers’ business challenges. Failing to adapt can result in being late to market
with key capabilities, or competition taking over the market position.
CTOs, CEOs and PMs at product companies face a critical decision that has drastic,
long-lasting consequences. Do they build solutions and components for theiroffering from scratch or do they buy them from a third-party vendor?
Both paths have inherent risks and obstacles. Misunderstanding functionality or
being unfamiliar with a new system can lead to serious negative ramifications forend users and brand damage. Conversely, building new functionality can be a long,arduous process that requires ongoing support and development.
Fortunately, today’s leaders have another way to extend business offerings andexpand further into the market without sacrificing current products.
The OpenText OEM Program makes a broad selection of OpenText’s information
management capabilities available to other technology companies to embed,
customize or white-label as part of their own solutions. By selecting OpenText,
a leader in information management, businesses can readily offer powerfulcapabilities that make them stand out in an increasingly digital world without
losing focus on their core competencies.
This paper will serve as a guide for leaders who want to explore the options ofbuilding vs buying. By the end, product leaders should have a good idea of whichapproach is best for their company.

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Building or buying—an overview
Before exploring the advantages and disadvantages of building or buying key partsof a software solution, it is helpful to describe precisely what is meant by the terms“build” and “buy.”
It is no longer viable to sell a minimal solution designed for a single purpose. Modern
businesses expect the software they purchase to not only come with standard
features but also to be enhanced with new features and options that solve theirunique challenges.
While many companies have the time and resources to build these core capabilities,
the majority have taken to buying solutions and components to cover the extras.
A “solution” is something that can be added to a product portfolio and soldto customers on its own. Conversely, a “component” adds a feature to an
existing product.
SolutionsComponents• Content Services platforms• Secure content storage• CRM• Data capture• Loan processing• Analytics modules• Practice management• Forms• Customer communications• Data analysis and discovery tools• Event management platforms• Project management tools• Marketing platforms

For example, if a company decided to add an analytical reporting feature to apractice management solution, it would be adding a component. If the company
were developing new practice management software from the ground up, it would
be developing a solution.
If this company decided to program the analytical reporting feature with its own
developers, it would be employing the “build” option. If, on the other hand, thecompany decided to license the analytical reporting feature from a third-party
supplier—like OpenText™ —it would be employing the “buy” option.
There are good reasons for both building and buying solutions and components.
Which makes the most sense for a given organization depends upon their specificstrengths and needs.

Why an organization may decide to build
Building a solution or component refers to a company developing capabilities in house,
without the use of third-party suppliers. This could mean creating and adding a newsolution to its portfolio or introducing a feature to an existing product or solution.

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Building a solution or component takes time and resources, but many businesses
may find it in their best interest if it simply doesn’t exist or isn’t done well byother companies.
Here are some advantages and disadvantages to consider when building new
solutions and components.
Advantages of building
Better customization
Companies who build functionality in house decide what is included and how. This allows them to develop
applications that specifically address a challenge their customers face and differentiate themselves fromtheir competition.
Greater control
Building provides complete control over ongoing development and support. Builders can more easily
introduce updates, upgrades and other changes desired or required by customers instead of waiting on athird party.
Easier onboarding and support
Developing internally brings with it intimate knowledge of how the solution or component works. This canbe passed on to support agents and onboarding specialists and can help solve problems for end users.
Disadvantages of building
Requires knowledge and expertise
Building functionality requires specialists who can dedicate their expertise to creating a fully specified andtested product. Even companies that have the types of resources and expertise required may still not havecapacity to dedicate to a new project.
Competition
Developing new functionality often pits the brand against similar offerings in the marketplace. These
existing offerings are usually developed by experts who are more experienced and have ironed out the bugs.
This makes it extremely difficult to compete, and harms the organization’s reputation if the new product is
not as competitive or appealing.
Takes time
Building something new takes time. Every minute without a marketable product costs revenue that could
have been generated with a purchased, ready-made solution.
Lack of scalability
It will be easier to get internally-built functionality to work with the organization’s current portfolio. But thisdoes not mean it will always be the case as technology develops. When new platforms and features emerge,
it may prove more difficult to keep older solutions compatible.

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Why an organization may decide to buy
Buying a solution refers to an organization licensing existing technology for use in
its products or portfolio. For many companies, buying a ready-made component orsolution from another developer or business may be a more convenient option.
For example, a company looking to add an analytical reporting feature to its practicemanagement solution may choose to use a dedicated application that is available
for white labelling. This would also be the case for purchasing complete solutions
and rebranding them under its own portfolio.
Whether due to lack of time, resources, expertise or knowledge, many organizations
choose to buy over build. Purchasing a solution or component enables businesses
to get to market faster, more efficiently and more reliably.
Here are some advantages and disadvantages to consider when buying new
solutions and components.
Advantages of buying
Proven concept
One of the inherent advantages of buying a solution or component is that the market has already tested it.
No finding and eliminating bugs is necessary, because the product has already been deployed for hundredsof other companies.
Fast deployment
Buying also offers the opportunity to get to market faster. Since the application has most likely adapted tosuit other businesses, it should deploy relatively quickly and integrate with ease.
Well documented and built-in support
A fully fleshed-out product should also have a strong support structure in place. Products available in themarket are usually very well documented and offer solutions to challenges that most businesses andend-users may face.
Option to leverage existing brandA unique advantage of buying functionality is having the option to leverage an existing brand. If not whitelabeling the application, the originating company can be promoted along with the organization’s existing
offerings if it has a good reputation.
Limited liability
Organizations that choose to develop a solution or component have the responsibility to fix it when things gowrong. When the tool is purchased, the onus is on the third-party company that provided the application.

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Disadvantages of buying
Requires high initial capital investment
Buying a solution or component requires an initial, typically substantial capital investment before it isimplemented. Not every company has the budget for such a large outlay.
Lacks customization
While purchased solutions and components can perform well, they often can’t be customized at the samelevel as in-house developed functionality.
Dependency on an external company
When using third-party functionality, organizations are reliant on that company to implement updates andchanges. The developer may choose to take the product in a different direction.

Since both building and buying come with advantages and drawbacks,
it is key to identify which are most important for meeting the organization’s
specific circumstances.

Building or buying—making the right call
Depending on the aspects of the market, the application needed, customer
demands and personal circumstances, either building or buying may be the correct
choice. Here are a few insights about today’s business environment to help informthe decision.
The majority of businesses should buy functionality, not build it
Most businesses and product leaders set out to build a solution because they
believe that they need to. Usually, the opposite is true.
This assumption is based on four core considerations:• The existence of established players who have been in the game longer and havemore sophisticated and specialized products.
• The possible flaws in a new system that could hurt established business.
• The fact that building a solution often takes longer and entails hidden expenses.
• The risk of technical debt: development teams making easier choices now thatcause expensive or time-consuming problems later.

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When to consider building—a checklist
Of course, the above doesn’t mean that all companies should always buy.
Sometimes building is absolutely the right call. It is just important to approach thatpossibility with caution. Many product teams fall in love with the idea of creating asolution rather than responding to the actual need and demand for one.
The following checklist will help assess if there is an actual need for building asolution or component.
• Is there an off-the-shelf product that exists to solve the problem?
• Is the needed solution, concept or component rare or unique?
• Will the organization be able to supply/sell the finished solution, concept orcomponent to other companies?
• Is the organization able to support this product for over five years?
• Does a cost-benefit analysis prove that it is truly cheaper to build than buy?
• Is there a clear long-term advantage to owning the solution, concept
or component?
• Does the organization have the necessary knowledge and expertise?
If the answer to most of these questions is “yes,” there may be a case for building
rather than buying.

Building or buying—current business environment conditions
It is also important to consider external business conditions that affect thedecision-making process of building or buying.
Digital transformation
Both end users and organizations are seeking ways to digitally transform how they
do business. The demand for new applications, solutions and components that
handle tasks more efficiently and effectively continues to grow every day.
Businesses will have to rapidly adapt or develop new solutions and components totheir existing solutions to capitalize on this opportunity.
Globalization and remote working
The trend towards a globalized workforce that crosses borders, nationalities andeven languages is more realized than ever and shows no signs of slowing down.
Tested, reliable, fool-proof solutions that help resolve the challenges of a remote
workforce will prove to be invaluable for the foreseeable future. Certain applications
once considered a luxury for teams, such as project management systems andteam-based applications, are now a necessity.

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The OpenText OEM Program
To take advantage of opportunities and adapt to shifting market demands,
companies need to add the right information management capabilities to theirportfolio quickly. These capabilities may prove difficult to develop and expensive
to build.
OpenText currently offers the broadest selection of information management
technology available, and now provides these solutions to other developers throughthe OpenText OEM Program.
The program enables enterprise software vendors to customize, embed, whitelabel and sell OpenText technology as part of their own solution offering to theircustomers, enabling a degree of customization and branding.
Members of the OEM program instantly gain access to hundreds of different
components for use in:• Enterprise applications (ERP, CRM, ECS, SCM, HRIS, etc.)• LOB applications (loan processing, contract management, customer
communications, etc.)• Industry applications (Healthcare IT, Financial Services Tech, Government
Solutions, etc.)• Service providers (business process outsourcers, IT service providers, cloudservice providers, hyper-scalers, managed service providers, etc.)

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Conclusion
Position paper:
Future-proof
your enterprisesoftware products
Webinar: To Build or Buy
in a Digital World?

For most companies, it seems more economical and effective to buy solutions
rather than develop them in house. Development comes with hidden challenges anddrawbacks, which can have consequences that impact businesses for years after
the final line of code has been submitted.
However, buying ready-made functionality comes with its own fair share ofchallenges. With the ever-increasing demands of end users, buying solutions andcomponents may not be an economically viable option.
The OpenText OEM Program is the more economical and practical approach forbusinesses. With the widest array of solutions and components available, it is a fullsuite of solutions to take on the challenges that businesses face today, and in thefuture. With offerings covering seven core information management disciplines,
building sophisticated business solutions has never been this achievable.

About OpenTextOpenText, The Information Company, enables organizations to gain insight throughmarket leading information management solutions, on-premises or in the cloud. For
more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit: opentext.com.

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