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The “Build or Buy” Dilemma: the Pros and Cons of Outsourcing Personalization

  • 10-15% ROI

    potential

  • 5-15% uplift

    in business KPIs

Author: Gabriella Vas

At the bottom of this post, you’ll find the Yusp “Build or Buy” questionnaire. Based on the answers, we’ll calculate which option works best for you, and send you the result in an email. 

To insource or to outsource? The dilemma is as old as the business functions it concerns. The same applies to SaaS (software-as-a-service) solutions, and to recommendation systems in particular. Ever since the emergence of personalization vendors offering recommendation systems on an SaaS basis, the temptation to build similar solutions in-house has also been present. 

In the software business, it’s called the “build or buy” dilemma. It’s complicated: pros and cons abound, and the right choice depends on many factors – some universal, others industry-specific. Your best bet is to find out about your options as much as you can, before making an informed decision. 

In this article, we’ll look at the upsides and the flipsides of building or buying a recommendation system. We’ll also examine some other options in between. We’ll tick off a long checklist of factors to consider before taking the leap. We’ll explain why businesses go from buying to building their recommendation systems, or the other way around. 

The “Build or Buy” Dilemma in Close-Up

If you want to use a recommendation system for your e-business, you can choose from a variety of SaaS personalization solutions offered by specialized vendors like Yusp. Alternatively, you can opt for building your own recommendation system from scratch. Hybrid solutions also exist, like building the platform in-house but incorporating “prefab” elements provided by personalization providers. (Case in point: Yusp’s standalone deep learning module .) 

Buying: Low Cost, Limited Control

In the context of personalization, buying means signing a contract with a provider who will set up, launch, and run a recommendation system based on your business requirements. (Read more about the implementation process here. You don’t actually buy the personalization technology – the software and the infrastructure is owned and operated by the provider. Instead, you subscribe to the service for a monthly fee. In case of Yusp, this fee is calculated based on the added value generated by the system’s recommendations, ensuring return on investment. 

Buying is an option that’s easy to love because it has some tangible benefits: 

However, buying also has a distinct set of drawbacks. 

Building: Perfect Fit at a Price

In the “build or buy” dichotomy, building means using internal resources (a team of data scientists and machine learning engineers, either created just for this purpose or branching out from other data mining activities) to assess business requirements and to devise the appropriate personalization solutions, while also creating and scaling the necessary infrastructure. Ideally, it includes integrating the recommendation system into the existing tech stack, plus continuous product development and business support. 

In light of the “Buy” pros and cons above, it’s plain to see why building your own recommendation system can seem tempting. Its two undeniable advantages:

But beware: such freedom comes at a hefty price. The risks and disadvantages of building include

Factors to Consider When Facing the “Build or Buy” Dilemma

Weighing up the pros and cons of both options is only the first step when pondering the “build or buy” question. Evaluating your circumstances and formulating your preferences is the key to finding the right direction for your business. 

Start off by establishing your stance on the general factors: 

Would you prefer to generate added value as soon as possible, or are you taking the long view? 

Next, look at the factors linked to the specifics of your business and your industry. 

Which category does your company fall into?  

Where would you place your business on that progress bar?  

Are SaaS recommendation systems easy to come by in your sector? 

Does your line of business lend itself to personalization?

How unique are your personalization use cases?

For a more hands-on approach to reaching a decision, fill out our “Build or Buy” questionnaire. Based on your responses, we’ll calculate which option works best for you, and email you the result. 

Why “Build or Buy” Is Not a Permanent Choice

As we’ve seen, the “build or buy” dilemma is a complex topic that requires careful judgment. The implications of choosing either option can have a long-lasting impact on your bottom line. This is not to say that “build or buy” is a once-in-a-lifetime decision. On the contrary: it’s quite common that businesses change course, some several times, going from buying a personalization solution to building their own, and back again. 

In a typical “buy to build” scenario, a company, in contract with a personalization provider, starts to experiment with building a recommendation system in-house. They might be curious about tweaking algorithms, or reluctant to part with sensitive data, or in some way encumbered by having to adapt to a third-party vendor. Once the management is confident enough, they pull the plug and switch from the SaaS solution to using their own personalization engine. 

The opposite case, “build to buy”, is perhaps less well-known, but – at least in our experience – it occurs far more often. Typically, A/B tests are the pivotal points, when a company decides to compare its home-grown personalization solution to a SaaS product, and comes to the conclusion that the latter performs better. According to our internal log of A/B tests, there have been 22 instances when Gravity R&D’s personalization engine, Yusp outperformed in-house solutions, and not a single time it was defeated. 

The main reason why in-house recommendation systems are abandoned is their failure to scale. Another possible explanation may be that their algorithm portfolio features “mainstream” elements like collaborative filtering or rule-based algorithms, but not the latest technology, like deep learning, which gives personalization specialists a competitive edge. In either case, failed A/B tests convert builders back into buyers. 

Alternative Solutions on the “Build or Buy” Spectrum

Not only is “build or buy” far from being a final decision; it’s not black or white, either. It doesn’t have to be one option or the other; there are alternative solutions between building and buying a personalization platform. This makes it possible for you to finetune your preferences in terms of investment, ownership, and control. 

Let’s look at these alternatives in more detail. 

“Buy the code” offerings are quite rare because algorithms are the “secret sauce” of personalization vendors and they’re reluctant to part with them. However, Yusp has made its deep learning algorithms available this way.

Whether You Choose to Build or to Buy, We Can Help

We’ve looked at the build or buy dilemma in detail: all the pros and cons; all the factors to consider before making a decision; the landscape of industry trends; and the various nuances of the build-buy spectrum. All this should provide a good base for an informed decision. Remember: when it comes to recommendation systems, whether you choose to buy one or to build one, or something in between, there are ways we can support you. Get in touch for more information.