Data exchanges have become the “go to” to help businesses deliver data-driven outcomes quickly and easily. But how do you decide if it is better to build or buy a data exchange?
Here is what you need to consider:
At a high level, building a data exchange allows a business to maximize customization for their organization’s requirements. On the other hand, buying an
data exchange gets you up to speed very quickly with a feature-rich solution and controlled, predictable costs.
Which path is right for you and your organization?
1. Ultimate Control: Build a proprietary data exchange, requiring integrating multiple technologies and developing software that facilitates data exchange.
2. Ultimate Experience and Support: Buy a data exchange platform that is purpose-built to enable users to find, understand and consume data quickly and easily.
Let’s look at the pros and cons of “build versus buy” across six evaluation parameters: Cost; capabilities; customization and control; time to value; and operational efficiency.
Building a data exchange
Many companies want to build their data exchange for three reasons:
- It gives them ultimate control over the capabilities and experience the exchange offers
- They want to make the most of existing data technology investments and ensure seamless integration
- They aren’t aware that there is an option to buy a data exchange platform
Here’s a run-down of positives and negatives:
- Building your own data exchange incurs the highest up-front costs covering design, development, infrastructure, licensed software and other expenses.
- There are also ongoing costs associated with operating, maintaining, and enhancing the exchange. This can be very high and continuous investment will be required diminishing the overall return on investment.
- You can build all the features and functions you want for your business, but it will likely take a very long time to reach a state of maturity. You can launch with an MVP (minimum viable product) that covers the basics, but it could be a few years to realize the full vision for your data exchange.
Customization and Control
- This is a distinct advantage of building your own data exchange: you can decide what to build and how to build it (within the constraints of your budget and capabilities). Again, you’ll also need to cover the total cost of feature development and maintenance.
Time to value
- You should expect an MVP data exchange to take 12+ months to build with a moderately sized team of at least 15 engineers, a product manager and support for infrastructure, architecture, security and general management. The scope of that MVP would be constrained to the most basic features and may not scale well.
- You will need to manage the data exchange end-to-end, forever. This means dedicating resources not just for software development but also for infrastructure, operations, and security. Unless your organization has the capabilities, experience and desire to develop and manage large technology platforms used by external organizations, you may need to outsource these capabilities.
Now, let’s take a look at the pros and cons of buying a data exchange “off the shelf”.
Buying a Data Exchange Platform
Here are the four key reasons companies choose to buy a data exchange platform:
- Realizing the benefit of the years of investment, development and in-market learning of the data exchange platform provider.
- Gaining new features and capabilities at no additional cost if delivered via a SaaS model.
- Maintaining focus on the core business objectives while the platform provider takes care of development, maintenance and security.
- Ensuring a predictable cost structure and yielding the highest return on investment.
- Software investment costs are spread across customers and benefits from economies of scale, so you get a robust set of capabilities from day one at a lower cost.
- A SaaS-based data exchange platform typically continues to deliver new capabilities within an agreed cost structure that scales with usage.
- You get a complete, market-tested set of capabilities from day one that will continue to improve over time.
- Sharing your requirements with your data exchange platform provider can influence the product roadmap towards your specific needs.
- You should expect custom branding and the ability to control the ‘rules of the game’, such as who participates and how they participate.
- There is typically rapid delivery of new features and an increasing ability to customize, as a commercial platform must support diverse customer requirements to be successful.
Time to Value
- This is a significant benefit. You can set up and launch your custom-branded data exchange data within days.
- Time saved, cost and resources on back-end operations are big with the platform provider taking responsibility for code and infrastructure management, security and even technology vendor management.
- The data exchange provider offers economies of scale, depth of experience, and singular focus on customers.
Weighing your options
Business use cases and requirements vary when it comes to data exchanges. After reviewing the pros and cons of each approach, you can use this grid to help you prioritize which criteria are most important and make the right choice for your business.
For an expanded discussion to determine the best decision for your organization, get the Data Exchange: Build or Buy Guide.