Make or Buy: The Blacksmith and the Toothpick

The BlacksmithUnder a spreading chestnut tree, the village blacksmith and I stand talking after lunch. “Man, that was great! I’ve never had forge-roasted corn before – say, do you have a toothpick?”

Smitty grinned. “Glad you liked it. I’ve got some scrap metal here, and the forge is still hot; give me a minute and I’ll make you one.”

I did a double-take. “I don’t think a steel toothpick would be good for my teeth. Do you have a wooden one?”

Smitty rubbed his jaw. “I can make a small dowel jig, to shape a chunk of wood into a toothpick. It should be ready in time for dinner.”

I shook my head. “No, I just want a simple toothpick. Don’t you have any toothpicks in your kitchen? They sell ‘em at Safeway for $1.29 a box.”

Smitty jeered, “Why the Hell would I buy toothpicks, when they’re so easy to make?”

“Birds fly, fish swim, and even during sharp downturns in housing, builders keep building.” – Tom LaRocque, The Denver Post, 2008

The Make or Buy Decision

The make or buy decision is an economic analysis, comparing different product life cycles and their financial implications. It takes into account capital costs, development expenses, maintenance costs, licenses, time to value, evolving product requirements, and of course, risks. For some proposed solutions, simply collecting all of the information required for a comprehensive analysis can be a project in itself. Many proof-of-concept projects have been initiated just to help clarify the issues for a make or buy recommendation. But for those who make, buying is simply foolishness. There is nothing on the market they can’t find fault with. Given enough time, they could make something better. Just ask them.

The larger issue is simple: time is money. There are opportunity costs associated with delay. Even if a completely custom-made product could be made as cheaply as it could be bought, it isn’t likely it could be available as quickly. And that basic notion, time to value, is becoming a key driver in a lot of make or buy decisions.

Make, Buy, or Subscribe?

Many companies are moving to software-as-a-service applications in order to minimize time to value, even if the application doesn’t offer as many capabilities as a licensed application that needs to be installed in the data center. Never mind the extensive feature set – does it meet our minimum requirements? How quickly can we get there? What is the incremental value of a shortened adoption cycle?

If you talk to enough decision makers, you start to hear certain patterns: a predictable operating cost is more interesting than possible savings, and a quick path to value is more interesting than features they won’t use right away. Of course, the folks who sell software licenses want to talk about their exotic features, pointing out all of the things the SaaS offering won’t do. It keeps them from having to admit that they have no way of knowing how many of their customers even use that exotic capability.

Getting to a Good Decision

A comprehensive make or buy analysis requires inputs from all of the alternative parties in interest. You simply have to qualify the information received. Those who make things want to make them; that’s their livelihood. The same goes for those who sell. Recognizing their interests and respecting their input, while adjusting their predictions to match most likely, rather than most optimistic case, is where the portfolio manager and project manager apply their professional experience and good judgment. Generally, you can build a good case for make, buy, or subscribe – the challenge is to make the best case for the portfolio.

New PM Articles for the Week of April 14 – 20

NewsNew project management articles published on the web during the week of April 14 – 20. We read all of this stuff so you don’t have to! Recommended:

Disaster and Recovery

  • Steven Levy finds project management lessons in the heartbreaking Korean ferry disaster.
  • John Goodpasture examines the way small teams deal with sudden disasters.
  • Nick Pisano points out that much of the criticism of the Obamacare website misses the real lessons.

PM Best Practices

  • Duncan Haughey tells us how to be effective coaches for our project teams.
  • Martin Webster argues that “winning” is great for sports, but lousy for teams at work. A cooperative style gets more done.
  • Andrew Filev presents some strategies for establishing good habits in your teams’s group behavior.
  • Alina Vrabie tells how to facilitate creativity within your team, using those soft skills we all like to talk about.
  • Luis Seaba Coelho shares some amazing data on the affect the “default” has on the decisions we make.
  • Philip Smith notes that many projects get off on the wrong foot, failing in requirements gathering and engaging senior executives.
  • Kerry Wills explains why it’s so important for your project team to establish the right pace.
  • Mike Clayton finds some great insights in the origins and evolution of the term “stakeholder.”

Agile Methods

  • Roman Pichler elegantly describes how we build a product that the users will actually want, using a Vision Board. Highly recommended!
  • Rich Karlgaard gives twelve reasons why your project team should be small enough to feed with two pizzas, and twelve tips for creating two-pizza teams.
  • Kevin Aguanno shares case studies of three Canadian banks that took different approaches to adopting Agile methods. Highly recommended!
  • Pawel Brodzinski says that if you want higher productivity metrics, just throw out the low numbers in your planning poker deck. I think that was humor …
  • Vijaya Kumar Bandaru has put together a great Scrum Master resource, for those who want to take servant leadership up a notch.

Governance

  • Glen Alleman finds himself explaining that yes, we can know the (approximate) value of what we’re building. Egad …
  • Kailash Awati tells a Holmes and Watson story of the PMO manager who was faced with a horrible truth – the dysfunctions of his organization.
  • Mike Donoghue proclaims the power of the user in guiding the evolution of technology.

Podcasts and Videos

  • Dave Prior interviews Kanban coach Frank Vega, who advocates for using workflow management for a variety of activities. Just 11 minutes, safe for work.
  • Cesar Abeid explains how to leverage the web to gain exposure and build your reputation. Just 50 minutes, safe for work.
  • Margaret Meloni tells us how project portfolio management fits into our working lives. Just 12 minutes, safe for work.

Enjoy!

New PM Articles for the Week of April 7 – 13

NewsboyNew project management articles published on the web during the week of April 7 – 13. We read all of this stuff so you don’t have to! Recommended:

If It Heartbleeds, It Leads

  • Rusty Foster explains the HeartBleed clearly enough for just about anyone to understand.
  • Brian Leach adds his thoughts to the stream of news on Heartbleed.
  • Mashable has compiled the Heartbleed Hit List: those major sites affected and not impacted. My recommendation: change your passwords, anyway. Just wait until those sites who admit to a problem have announced a solution, before you change that password. Meantime, don’t log in!

PM Best Practices

  • Chad Baker recounts a recent lessons learned session where the team explored what went well, and found a useful recommendation for future projects.
  • Bart Gerardi continues his series on “watermelon projects” with an ounce of prevention.
  • Elizabeth Harrin reviews “Trust in Virtual Teams,” by Thomas P. Wise.
  • Scott Berkun enumerates the ways in which remote work improves diversity.
  • Lynda Bourne reveals the potential impact of differing cultural perceptions of the relative importance of past, present, and future.
  • Roberto Toledo explains how to reduce the time required to plan a project, with a Project Planning Acceleration Project.
  • Ireti Oke-Pollard reminds us to give the operations folks “a seat at the table” during our project, so we don’t deliver something that they can economically support.
  • Zach Watson gives the elevator pitch for five Open Source project management alternatives.
  • Mike Clayton sings the praises of spreadsheets, and recommends a great resource for creative solutions using Excel.
  • Bruce McGraw gets back to the basics with project communication.
  • Joe Crumpler has found a gap in his skill set – call it business storytelling.

Agile Methods

  • Johanna Rothman continues her series on designing your Agile project, with a look at how the team will interact with management.
  • Pawel Brodzinski makes the case for unscaling Agile. That’s right: think smaller!
  • Nick Pisano refutes Neil Killick’s assertion that “traditional software development contracts” are the problem.

Strategy and Governance

  • Cornelius Fichtner interviews John Donahoe, SPMO Director at the Star Alliance, on the nature and value provided by the Strategic PMO. Just 24 minutes, safe for work.
  • Kevin Kern on PMO success: “The ultimate [PMO] is a model of defined and aligned processes, with results tracking and transparency to match.”
  • Allen Ruddock observes that a PMO has to be close to the action in order to be effective. Not off-shored, or shared services, but an actual participant!
  • Glen Alleman applies an IT governance and decision rights mindset to the #NoEstimates movement, referencing a book by Peter Weill and Jeanne Ross.
  • John Goodpasture notes the difference between a cost and an investment, and between maturity and decline.
  • Rich Maltzman and Dave Shirley trot out statistics that demonstrate strategic alignment has a significant impact on the probability of a successful project.

Podcasts and Videos

  • Cesar Abeid interviews Patrick Snow on growing a passion into business, while keeping your day job. Just 36 minutes, safe for work.
  • Michel Dion adds his comments to that new slice-of-death video, “The Expert.” Less than seven minutes, safe for work, and more depressing than a week’s worth of Dilbert.

Enjoy!