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 31 – April 6

Cartoon NewsboyNew project management articles published on the web during the week of March 31 – April 6. We read all of this stuff so you don’t have to! And Elizabeth Harrin was kind enough to give me a guest spot on her blog, PM4Girls – thanks, Mum! Also recommended:

PM Best Practices

  • Glen Alleman explores the clever phrase, “Do it right or do it twice.”
  • Gary Nelson notes that there is an appropriate window of opportunity for change. After that, everything gets expensive or impossible.
  • Bruce Benson sings the praises of arguments, disputes, and debates.
  • Barry Hodge argues that Nozbe is the best “to do” list app for project managers, and gives five excellent reasons. I’m still not ditching Trello, though …
  • Dick Billows notes the advantages of using a software-based project scheduling tool, and shoots down the arguments against it.
  • Marian Haus recaps the three “traditional” techniques for overcoming project schedule constraints.
  • John Goodpasture shares a challenge question he puts to his risk management students, on how to assess the impact of a new technology, process, or vendor.
  • Tony Adams traces the link between the project charter and the engagement of the project sponsor.
  • Henny Portman links us to some great how-to videos for Excel – the project manager’s Swiss Army Knife.
  • Sue Geuens notes that incorrect data records can lead to some pretty serious consequences.

Agile Methods

  • Jeff Pierce addresses requirements gathering for those development projects with a lot of constraints.
  • Johanna Rothman continues her series on designing your own Agile project, with a look at dealing with the unknowns.
  • Cheri Baker looks into the post-success bounce, and why success is so often temporary.
  • Soma Bhattacharya talks about what to do once you’ve succeeded, and your Scrum team is successful, productive, and stable.
  • Dave Prior reflects on how he’s using (and benefiting from) his personal Kanban, as a follow-up to his interviews with Jim Benson.
  • Paulo Dias looks at the down side of starting a Sprint on a Monday.

Strategy and Governance

  • Martin Webster asks an interesting question: “Does strategy emerge or is it planned?”
  • Elizabeth Harrin reviews Georg Vielmetter and Yvonne Sell’s new book, “Leadership 2030: The Six Megatrends You Need to Understand to Lead Your Company into the Future .”
  • Michael Wood notes that the maxim “simpler is better” also applies to project portfolio management.

Your Career

  • Dennis McCafferty shares a slide deck that shows compensation and career prospects for experience project managers are looking very good, indeed.
  • Linky van der Merwe links us to a few resources for project managers looking to make a career move.
  • Michel Dion provides some tips for those preparing for a job interview.

Enjoy!

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!