2.3.4.2: Make-or-Buy Analysis
- Page ID
- 48557
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)Defining the Outsourcing Boundary
Section Overview
Now that you have completed your SWOT analysis, the next step is to decide which parts of the Reckon project should be completed in-house and which may be suitable for outsourcing. This is known as a make-or-buy decision.
A make-or-buy analysis is a structured approach to evaluating whether the organization should internally "make" (develop, manage, or build) a component or "buy" (outsource) it from an external vendor. This decision is based on factors such as cost, capability, risk, speed, and strategic value.
The results of this section will directly influence your scope planning, vendor selection, and contract structure later in the project.
Learning Objectives
By completing this section, you will be able to:
- Break down a complex project into distinct work components
- Evaluate each component for outsourcing potential
- Justify in-house versus outsourced decisions with clear rationale
- Prepare for detailed vendor scoping and SOW development in later phases
Instructions
Follow the steps below to complete your analysis.
Step 1: Review the Reckon Project Plan
Carefully examine the project plan provided for the Reckon initiative. Pay particular attention to the task breakdown, timelines, estimated resource needs, and skill requirements. Ask yourself:
- Which components are clearly defined and modular?
- Which components require integration with internal systems or proprietary knowledge?
- Which tasks are time-sensitive or skill-intensive?
- Where are the team’s internal limitations?
Make notes in your team folder as you work through these questions.
Step 2: Identify Work Components
List the major components, phases, or deliverables of the project. Depending on how the project is structured, these might include items such as:
- Business analysis and requirements gathering
- UI/UX design
- Front-end development
- Back-end integration
- API or middleware development
- Testing and quality assurance
- Documentation and training
If the project involves physical deliverables or services, define components relevant to that domain.
Step 3: Complete the Make-or-Buy Table
Use the following format to evaluate each component.
|
Work Component |
Make In-House or Buy (Outsource)? |
Rationale |
|---|---|---|
|
Example: UI Design |
Buy |
Requires fast turnaround and external creative expertise |
|
Example: Database Architecture |
Make |
Involves secure access to internal systems and legacy integration |
Your rationale should reflect both strategic considerations (e.g., IP sensitivity, risk) and operational realities (e.g., lack of staff, urgency, cost efficiency).
Aim to complete this table for at least six to eight key project components.
Step 4: Write a Summary
Write a short paragraph (five to seven sentences) summarizing your overall outsourcing boundary. This should include:
- What work you recommend outsourcing and why
- What work must stay in-house and why
- Any special requirements or assumptions that influenced your decision
- How this allocation will impact project coordination and oversight
This summary will help you frame your outsourcing scope in the Statement of Work and your supplier selection strategy later in the milestone.
Tips and Guidance
- Don’t default to outsourcing everything or nothing. Focus on fit.
- Consider how easily a task can be defined, handed off, tested, and measured.
- Think about how dependencies between tasks will be managed.
- Consult your SWOT analysis to revisit capacity, risks, and resource gaps.
- If your team is unsure, start by outsourcing low-risk, non-core components and scale outward from there.
Deliverable
Each team must submit:
- A completed Make-or-Buy Table with rationale for each decision
- A written summary describing your overall sourcing boundary and decision logic
This will form the basis of your Statement of Work and will inform your contract and risk planning.