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 March 17 – 23

NewspapersNew project management articles published on the web during the week of March 17 – 23. We read all of this stuff so you don’t have to! Recommended:

Innovation

  • John Bauer provides a history lesson and some predictions on the evolution of corporate IT, their relationship with the business, and everything-as-a-service.
  • Peter Bruzzese sees the end of on-premises IT, as we move everything to the Cloud.
  • Ammar Mango examines the intersection of innovation and project management.
  • John Goodpasture suggests that when the evidence doesn’t indicate a clear course of action, you should make an informed judgment.
  • Bruce Benson observes one key project management lesson from ObamaCare is “Try something new.” Just providing an alternative can sometimes drive innovation.
  • Elizabeth Harrin provides her round up of project management news for this month.
  • Lyndsey Gilpin shares photos and stories of the women who created the technology industry: Ada Lovelace, Grace Hopper, Hedy Lamarr, and more!

PM Best Practices

  •  Vicki Wrona shares best practices for effective brainstorming, including a technique called Reverse Brainstorming.
  • Brad Egeland presents his approach to planning and conducting meetings that are productive, organized, and effective.
  • Graham Oakes examines risk management from the perspective of the trigger point, e.g. when the probabilistic risk event actually occurs.
  • Martin Webster presents a slightly facetious case for avoiding blame by avoiding risk.
  • Coert Visser explains why it seems like other people succeed so easily, when we have to work so hard. Short answer: we’re mistaken about how much it takes.
  • Cheri Baker models three short examples of pushing back.
  • Cesar Abeid interviews Dave Stachowiak on how to manage, lead, and influence without authority. Just 57 minutes, safe for work.
  • Srinath Ramakrishnan summarizes five change management models.
  • Glen Alleman extracts key points from James Dewar’s “Assumption-Based Planning.”
  • Andy Jordan recommends that we partner with the customer to select the right project execution approach (Agile vs. Waterfall).
  • Anne-Marie Charrett refutes the “waterfall is never the right approach mindset,” by debunking the most common memes.

Agile Methods

  • David Clarke explains why SaaS provider Workday has moved to a single codeline model for continuous development and release. Read this one twice!
  • Dave Prior interviews Dr. Sallyann Freudenberg on the psychological basis for the effectiveness of pair programming. Just 15 minutes, safe for work.
  • Mike Cohn explores the subtle differences in two definitions of velocity.
  • Clinton Ages explains how his business analyst skill set best fits in with a Scrum team.

Governance

  • Shim Marom begins a series on IT investment, with the need for a business case.
  • Emanuele Passera begins a series on portfolio management, using rigorous financial analysis.
  • Henny Portman provides a bullet list of questions to ask about the actions of the project owner before replacing the manager of a troubled project.

Enjoy!

New PM Articles for the Week of November 18 – 24

NewsboyNew project management articles published on the web during the week of November 18 – 24. We read all of this stuff so you don’t have to! Recommended:

Must read

  • Scott Berkun shares the notes from his data analysis presentation at the Warm Gun 2013 conference on measurable design. The model matters more than the data!
  • Michael Greer tells a story, illustrating how simply requesting sign-off in order to proceed can be a powerful tool for getting decisions finalized.

Leadership

  • Terry Bunio lists four critical qualities for a good manager.
  • Michael Lopp catalogs three basic roles for leaders. “In order to build epic shit at scale, a colorful tapestry of talent and degrees of experience is essential.”
  • Martin Webster asks if your leadership is actually slowing progress.
  • Peter de Jager shares his thoughts on helping a team form by creating opportunities for them to collaborate.
  • Cheri Baker recaps a few good communications habits that can make our colleagues feel more at ease.
  • Kenneth Darter takes a moment to help us develop our face-to-face social skills.
  • Cyndee Miller offers one final observation from PMO Symposium 2013: PMO Directors need to think like executives.

PM Best Practices

  • Elizabeth Harrin interviews Angel Berniz, who explains how the new project management standard, ISO 21500, will impact us.
  • Vincent McGevna defends the application of processes to the execution of projects.
  • Todd Williams breaks down the roles and responsibilities of the folks charged with rescuing a failed project.
  • David Hillson suggests a framework for identifying project risks, based on Edward de Bono’s Six Value Medals. You might remember de Bono for the Six Thinking Hats.
  • Luis Seabra Coelho examines the cognitive bias known as functional fixedness, and how it might apply to motivation.
  • Anya Faingersh recounts an old story that illustrates why an expensive solution delivered now beats a cost-effective solution, delivered too late.

Podcasts and Videos

  • Samad Aidane interviews Naomi Caietti, who explains how women in project management roles can achieve the right degree of assertiveness. Just 44 minutes, safe for work.
  • Cornelius Fichtner interviews Ricardo Vargas, who explains his approach to quantifying a qualitative risk analysis. Nerdy, but interesting ; 23 minutes, safe for work.
  • Cesar Abeid interviews Francis Wade on his consulting practice and book on time management. Just 48 minutes, safe for work.

Agile Methods

  • Glen Alleman critiques NPR journalista Elise Hu’s article on why Heatlthcare.gov was doomed from the start.
  • Jesse Fewell came from the Washington, D.C. Scrum User’s Groups with new insights into why the roll-out of Healthcare.gov failed so badly.
  • Shim Marom articulates the difference between doing Agile and being Agile.
  • Derek Huether covers the key barriers to Agile adoption, as found by VersionOne in their annual survey.

Pot Pouri

  • Harold Kerzner describes a family Thanksgiving, from a project manager’s point of view. But the PM is not the person actually in charge …
  • Karina Keith rounds up three blog articles on how to maintain your productivity over the holidays.  Makes me wonder if someone is missing the point.
  • Belle Beth Cooper has collected ten statistics on social media that should inform your company’s strategy for marketing and communication.

Enjoy!