Shifting Focus on the Build vs Buy Dilemma

Shifting Focus on the Build vs Buy Dilemma

In a sea of options, with endless pitfalls, how can one ensure that buying or building is ever the right decision?

IA Fintech Member Insights: HUBX


All 21st century CEOs, COOs and CTOs are faced with the high-stakes question of whether to build or purchase enterprise technology. The Financial Services sector is a prime example of overturned business models demanding innovative solutions. Firms must re-evaluate their approach to technology and dedicate ever-growing resources to the creation or integration of digital solutions.

In a sea of options, with endless pitfalls, how can one ensure that buying or building is ever the right decision?



Building proprietary technology can often seem the simplest solution for your business: ‘I know my pain points better than anyone, how hard can it be to build an online tool?’ Yet, often what starts as an innovative and exciting side project, can turn into an undertaking that is tantamount to setting up a completely new business.

Banks spend over 80% of their IT budgets maintaining legacy systems.


Hiring new expertise is the first hurdle. In a climate where strong tech talent is highly sought-after, investment firms find themselves searching for skills they are not yet equipped to evaluate. Teams of project managers, developers and – if you are serious about keeping up with the pace of technology – data scientists, are all required to develop enterprise technology that will work. Such a process is equivalent to building a whole technology firm from scratch.

Building proprietary technology also involves a daunting volume of maintenance of new and legacy systems. Banks, for example, spend over 80% of their IT budgets maintaining legacy systems. The core focus of such intensive maintenance of proprietary systems are security and data privacy standards. This is particularly relevant for the financial sector.

If building proprietary technology is no different from setting up a separate business, it is critical to evaluate it properly. Is this business going to earn any money? What are revenues and profit margins? Is it worth investing the necessary time and money?


Hiring new expertise is not easy


High-performing technology firms are well known for their ability to focus. When building a product, tech teams usually work in sprints. These are short periods (between 1 week and 1 month) where the team is focused on achieving certain development goals. During a sprint, any other issue which hampers progress towards those goals is irrelevant and pushed into a future sprint.

Such a culture of absolute focus is apparent in strategic partnerships. Rather than moving focus from their core product, tech firms choose to partner with other tech players. Almost immediately they can provide services which would have taken years to build. This explains the boom in tech and fintech M&A in recent years. 1H18 saw 140 M&A transactions in the Fintech sector alone, at a value of nearly $40BNPayPal famously acquired iZettle in 2018, in part so that it could target small merchants through iZettle’s dongle.

$40BN M&A Transactions in the Fintech Sector alone, in 1H18.


Credit to APIs for making technology integration more seamless than ever. In our platform economy, new tools and services can plug into existing products with ease. Cloud communications platform, Twilio, recently acquired API platform SendGrid to establish themselves in the email market. It has never been easier to adopt new technology.

PayPal and Twilio are known to partner with other tech firms to expand their offerings, not only for ease but also to prevent diluting their focus. Even though, as well-established tech firms, they have the expertise to execute these projects in-house, they choose to remain focused on their core business and take advantage of other companies’ services.



Where customisation is involved, it becomes highly relevant for businesses to build their own solutions. It is hugely attractive to have 360° control over the customisation of one’s own enterprise technology. Leaders can create a solution according to specific work flows and use cases. The large firms often have the capacity to do so.

However the decision needn’t be as dichotomous as build or buy: some large financial firms adopt elements of both into their development cycle. The advent of APIs and platform technology makes a hybrid approach achievable. Fintechs are now built to plug-in-and-play, so that incumbents can pick and choose which features to integrate.


Developing enterprise technology is a significant responsibility for financial services firms. The sensitive nature of information handled, regulatory requirements, and data privacy laws all put pressure on such projects. On top of this, there’s massive capital expenditure and ongoing costs.

When purchasing a solution however, such pressures are considerably relieved. The decision to buy is less critical yet has the capacity to be equally consequential.

Subscription models have made software adoption easier than ever before – about 84% of new software is built on the SaaS model. New systems can be setup in minutes, causing minimal disruption to core businesses. This will leave you time to concentrate on other, arguably more important, factors, such as getting your team ready to adopt new technologies. Moreover, ‘Cancel at any time’ policies allow trial periods to mitigate the risk of adoption – not an option for those building in-house solutions.

The current wave of new technologies is a boon to the financial sector. Firms can test out options with limited risk, shifting the question from ‘Build or buy’ to ‘Which to buy first?’.


Further information about HUBX can be found here

Article by: Matilda Waters – Corporate Development – HUBX



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