To Build, Buy, or Borrow?

Bruce Meraviglia , Technology & Marketing Editor [ Microfinance Focus ]

This month we begin a new technology column for Microfinance Focus.  This column will review current technologies that may offer benefits for MFI’s, either for internal use or for the benefit of their borrowers – perhaps even to serve as potential business concepts the MFI may choose to present to potential borrowers.  The technologies that will be reviewed will range from Information Technology (IT) to renewable energy, and such technologies in between that may be of interest to the MFI community.  Each column will be complemented by an online Technology Review blog by the author on the Microfinance Focus website that will allow for feedback from the readers of this magazine.

For this month’s column, we will discuss the issue of computer software for use within the MFI itself.  In the field of software development, every organization has traditionally been faced with determining whether it is better off paying for its own IT personnel to develop software to meet a specific need (Build), or to purchase appropriate software from an outside vendor (Buy), including the potential cost of modifying the commercially available software to suit the specific requirements of the organization.  This has traditionally been referred to as the Build versus Buy decision; a decision that each IT manager must make, and then defend to the executive committee of his organization.

This form of decision making is so established that it is taught in both technical universities as well as in business schools.  In the past, it has been the traditional process for determining how new software should be acquired, and an endless source of conflict between the IT departments and the executive leadership of an organization; the IT personnel are seldom trained in how to write a business justification, and the business personnel typically lack the software experience to evaluate the technical criteria.  In today’s current business environment, this process is now further complicated by the potential to use software that has been made available for free for use by others (often referred to as “freeware”).  This free software is essentially “borrowed.”

Prior to the Internet, there were small communities of software developers who wrote this type of software; when the source code (instructions) were also made available, it was then referred to as “open source software.”  Since the advent of the Internet, these disparate groups of hobbyists (many of whom were often employed full-time as professional software developers) were able to come together to form larger communities of individuals who shared common interests in the types of software they developed, software such as accounting packages, word processors, or even the operating systems used to run computers.  The most famous of these software development communities is the one that develops and supports the LINUX operating system, and the most widely used umbrella community where free and reliable software can be obtained is the SourceForge community (http://www.sourceforge.net).

While nothing is more attractive to business managers than capable software for free, or more attractive to IT personnel than the chance to use and enhance another group’s software, the question that is seldom addressed by anyone is:  “To what extent can you rely on software that is developed as a hobby by others for critical applications in the MFI?”  If free software is acquired without the appropriate skill set of the internal IT personnel to support it, and there is no organization dedicated to support the MFI with training in its use or modification, is it more expensive to “borrow” free software than to pay for its traditional acquisition?