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Build vs. Buy: Key Considerations When Embarking on Technology Transformation

09 March 2021 James Kwan

Maritime and shipping organizations are increasingly investing in digital transformation in order to remain competitive in the face of industry pressures, volatility and growing demands from customers and service partners for real-time access to operational data. While this trend has been picking up speed in recent years, the pandemic has accelerated it further by underscoring the industry's vulnerabilities, as it has struggled to adapt to supply-chain disruption and remote working.

One of the first decisions maritime organizations face when exploring their options in relation to digital transformation is whether they should build or buy a solution. As little as a decade ago, with few purpose-built solutions for workflow automation, data management and related practices on the market, building a solution in-house was an attractive option for many. However, as vendor technologies have matured and industry priorities have shifted, the benefits of buying a solution have multiplied.

Here are four key points that maritime and shipping industry participants should consider when deciding whether to build or buy the workflow automation or data management solution they need to support their digital transformation strategy.

Risk management

For most organizations, building technology is outside their core competence, which means there is an element of risk involved in taking on the challenge of designing, building, and delivering a stable and high-performing solution in-house. This risk also applies to the organization's capacity to manage ongoing monitoring, maintenance and upgrades to ensure the platform continues to provide reliable, optimal support.

In-house builds are also vulnerable to key-person risk because in many cases, one team member holds the operational knowledge and is solely responsible for managing the solution. In these situations, staff turnover can be devastating for the organization, resulting in the inability to adapt and scale, or even impacting critical business lines. By situating this function outside the organization, a vendor solution protects legacy knowledge and provides continuity.

Time-to-market

For many, the need for digital transformation is urgent and time is a luxury in short supply. Vendor solutions offer a clear advantage in this regard, as they are tried, tested, and ready to implement.

Resource utilization

Reassigning employees or bringing in new talent to build and manage technology draws resources and focus away from the organization's core capabilities, and there is an opportunity cost to be factored into the build or buy decision. When an organization's human and financial resources are diverted to support a complex and intensive technology initiative, it can jeopardize the ability to support critical business areas or explore new opportunities.

A specialist third-party solution can help your organization protect resources in two ways. First, it eliminates the considerable resource consumption associated with the build itself. Second, if the vendor offers a managed service deployment model, it enables the organization to offload responsibility for ongoing maintenance, change management, support and upgrades. Not only does this free up internal resources, but it also results in a lower total cost of ownership (TCO), in both the short and long term, when compared to an in-house solution.

Network effect

Historically, organizations in the maritime and shipping industry have carefully guarded their industry knowledge and experience, but this is changing rapidly as industry players experience the benefits of forming communities to collaborate and share knowledge to achieve efficiencies across the supply chain.

Organizations that implement a vendor solution are benefiting not only from the expertise and R&D of the vendor, but also from the experience of users at other companies who provide their feedback for the ongoing development of the product. As the maritime industry continues to move towards greater openness, standardization and collaboration, participants relying on siloed, heavily-customized, in-house platforms are likely to find themselves at a disadvantage compared to their peer group.

Conclusion

Answering the build vs. buy question requires an understanding of how the maritime industry and the technology landscape have changed. The continued maturation of vendor technology and managed services, together with increased adoption rates across the industry, have now clearly shifted the balance in favour of vendor options for maritime organizations that want to reduce risk, take advantage of more value-add opportunities, and optimize resource and capital utilization.

Visit our webpage to find out how we are helping industry participants maximize the value of their data and embrace digital transformation.

Posted 09 March 2021 by James Kwan, Associate Director, Business Lead, EDM for Maritime, IHS Markit

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