A common issue faced by companies large and small across all business lines is how to allocate their budgets? Do they service or manufacture themselves or do they outsource these services to a third party? Do they want an expense or a liability on the balance sheet? There are advantages to both strategies, especially in the digital marketing space where multiple levels of skill are required and necessary to build and manage. Let’s review the pros and cons of building out your own platform verse using third party services.
Should I build it? Liability.
The most basic question is: Is it going to be cost effective in the long term to take the time time and man hours to build out a proprietary analytics platform? Or does it make sense to continue using third parties? What is going to be the most cost effective strategy for me to achieve my goals?
In the long term, it can be cost effective to make the short term sacrifices associated with the cost of building out a proprietary platform. Having control of the data being reported, altering and making changes along the process is a huge competitive advantage. Having control is an advantage, as long as you build a system that can adapt and change as you need. Forward thinking from the start will benefit when it’s time to update, change and improve.
But this advantage comes at a cost. It starts on day one, when the idea moves from concept to product. The cost of building the platform, hardware, software, UI and design can add up quickly. The complexity of the reporting will amplify the costs too.
Technology is like buying a suit, you can buy a cheap suit but you will end up buying six more. Or you can invest early and over time recoup the upfront costs with the longevity of the suit. Depending on the life cycle of the business these upfront costs can be make or break expenses. Cutting corners to reduce costs can turn a great concept into an expensive one dimensional tool.
After you’ve built the platform you’ll need to have a staff to maintain its upkeep and use the system. A full-time person is required, otherwise you’re leaving the most valuable tool your business has in the hands of a third party that doesn’t have the same urgency as you. You’re going to need a person or team that understands the platform inside and out. They’ll also need to train the rest of your team when the time comes.
Like buying a car or a home, expenses can add up quickly. Fully understanding the process and future costs associated with building your own proprietary platform is not only required, but necessary when estimating upfront and long term costs of this type of endeavour. Building the wrong platform isn’t only a time consuming failure, but catastrophic to your company financials.
Should I Rent it? Expense.
The advantage to renting, leasing or buying a reporting platform service is that is appears to be the apparent cheaper solution. From lower costs, to flexibility, to overall maintenance, using a third party can appear to be the right decision. But the advantages of having a proprietary platform are easy to see when using a third party.
Do they provide the data you need? What is the timeliness of the reporting? How good is the reporting? What are the costs and how frequent do they upgrade or change how the system works? When using a third party reporting platform, it is vital that the service is thoroughly reviewed and tested. The costs of the services justify the data and results it provides.
The obvious disadvantage associated with using a third party platform is that it’s not your platform. This can be a challenge if you’re looking for specific data sets that might not be a common reporting function. Though, there are services that do provide a la carte style reporting, you’re dependent upon their ability to execute, their up-time and the reliability of their platform. When using a third party reporting platform thoroughness of your research must cover all possible situations and functions.
Using a third party platform can provide flexibility. Upgrades of additional services and the ability to incorporate multiple platforms is huge advantage in an ever-changing environment. Depending on the provider, there is flexibility to change if needs aren’t being met too. There is no cost associated for updating and maintenance of the platform, but over time costs can start to add up.
There is no right or wrong answer, it’s about understanding your needs yesterday, today and tomorrow. This isn’t a big versus small company situation. There are plenty of SMB (Small-Medium Businesses), as well as very large global businesses that have made decisions to build out or use a third party. It’s all about understanding the advantage and disadvantage and the costs associated with both when making the decision.
Originally Posted: June 16th, 2015.
Post Updated: November 22nd, 2017