By: Kevin Strawbridge
It is hard to believe that a mere 25 years ago companies were just taking first steps in implementing a new use of a technology that had been around for about 25 years – the World Wide Web. Today, the web, or internet, is as pervasive in our lives as water, electricity and even food. As these companies looked ahead there was a hope for an efficient information and sales channel that would add more opportunities for reaching customers and increasing sales.
People around the world are busier than ever. They work longer hours, do more things with family, and participate in more activities. In order to better sell to customers, companies turned to the web to bring shopping to the people and enable a more efficient channel to sell goods and services (either as part of a comprehensive multi-channel approach or a pure play, direct-to-consumer approach).
At first, technology departments cobbled together new technologies and bolted them together with existing ordering and database systems that would allow a visitor to see a product, select it, pay for it and have it shipped. Soon, technology and software companies determined optimal processes for handing and transacting orders online. This led to the development of pre-packaged systems that companies could buy and install within existing technology infrastructure. These “packages” would handle things like page layout, content management (CMS), product inventory management (PIM), payment gateways, onsite search, and a multitude of other tools to create a better user experience. But like all software, none was a panacea. Therefore a multitude of packages were developed and installed in tens of thousands of companies. However, many companies did not see value in the package systems and decided to create custom solutions in house for themselves.
Fast forward to 2020. B2B eCommerce is moving to the forefront in the eCommerce landscape. Companies and manufacturers are finding ways to create more efficient channels using online means. Based on this, companies are just grasping B2B eCommerce and quickly adopting the positive outcomes of the last decade of investment by B2C companies in the online space. In a recent survey, 49% of B2B eCommerce executives said they will upgrade their eCommerce platforms within the next 18 months. Those “upgrades” will certainly spawn many buy vs. build discussions.
Everyone wants to think they have a solution, product or service that is unique and unmatched. That may be the case for what is being sold, but that does not always mean that how it is sold is all that unique. It is important to review the processes being used, along with what is being sold to come to a decision on when to build or when to buy an eCommerce platform.
It really comes down to three things to consider: Time, Talent and Resources
Companies come to the decision to embrace the online sales channel for many different reasons. It could be that the business is ramping fast and this kind of direct channel is just the right addition to add more sales without stressing existing offline channels. Or, companies could be floundering and seeking a way to replace channels that are losing share. Either way, the addition or enhancement of the online channel is usually needed very quickly. In the case of a package solution, these can be installed relatively fast (if choosing little to no customization and a simple selling structure) or over a period of six months to two years depending on how many bells and whistles are required. It is very important that companies look at this from a strategic perspective. Just buying a package, implementing basic functionality, and moving ahead can lead to bigger issues down the road such as providing a poor customer experience, lack of infrastructure, and outgrowing the platform. The more time available before implementation is required allows for a stronger consideration for building. This can allow for proper customization, development of tools and infrastructure, and roll-out.
Some companies are small and have very limited access to people who can do solid development work on-time and consistently. They may have chosen to invest in people for other areas of the business that are, or were, more strategic to the business. When access to in-house talent is limited, package solutions become a stronger alternative. Companies gain the flexibility of working with third party implementers that can set-up and maintain the platform while core personnel manage other strategic areas of the business. At the same time, a surplus of talent in a particular technology area (e.g. .Net, Python, PHP or other software) can quickly define if an eCommerce platform has to be developed internally based on prejudice to the skills or the ability to get all systems talking together. As an example, many Microsoft focused shops tend to build customized .Net platforms to match talent and maintain consistency of systems. This is not always the case, but it further underscores the diligence required in the buy vs. build decision.
Resources, in this case, refers to access to capital to buy or build eCommerce platform solutions. In tandem with the previously discussed criteria of time and talent, the resources available can increase the flexibility the company has to adapt to the circumstances at hand. If a business has less access to capital, it may make more sense to slowly build a solution that can be added to over time as capital comes available through operations or via investment. Or, a package alternative that is paid for on a “pay as you go” approach (essentially leased) could assuage the financial constraints the company is working through over the short or long-term. Regardless of the situation, it is imperative that the company be mindful of the capital constraints and marry the overall strategy to the platform decision in order to properly support the online channel over time.
Buy vs. Build has long been a business case that companies have to consider as they evolve and operate in a changing world. B2B companies are now developing or buying eCommerce platforms so that they can create more efficiency via an online channel. This efficiency should translate into increased shareholder value and accrue to longer-term success. When paying attention to time, talent and resources, these B2B companies will be able to properly assign value to each respective input and make a strategic decision. The correct answer is not “buy” or “build”, but rather whether the right inputs were leveraged to maximize that decision.
About Kevin Strawbridge:
Kevin Strawbridge has established a solid business background encompassing accounting/finance to Big 6 Consulting to E-Commerce. Building off a BBA and MS in Accounting, Kevin spent several years working in audit and as a controller. From there, he moved on to PricewaterhouseCoopers where he was a management consultant focused on building shared service centers and business process re-engineering. In 1999, Mr. Strawbridge ventured out into the start-up realm in helping to start SmartPrice.com, an online telephone long distance comparison site. While at SmartPrice, he developed strategic partnerships and developed the finance and administrative infrastructure of the company.
With a strong interest in, and desire to grow in the burgeoning eCommerce space, Kevin joined jcpenney.com in 2001. During a four year turn-around for this national icon, he worked in several eCommerce and direct mail capacities centered on business development and marketing. As jcpenney.com approached $800MM in annual sales, Mr. Strawbridge ran affiliate, search, portal and strategic partnership programs that accounted for nearly 10% of total sales. Mr. Strawbridge was hired away from jcpenney.com in 2004 and progressed through several roles at small and large companies, B2B and B2C companies and retail to technology working in all aspects of eCommerce – marketing, merchandising, operations and analytics. He served as president for divisions of two companies (one public and one private equity-owned) and as CEO for a large, direct-to-consumer eCommerce platform. Currently he provides advisory and consulting services to companies looking to improve efficiency in processes; especially related to eCommerce.