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Buy vs. build a procurement system

Tail Sourcing teamMarch 22, 202611 min read
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Two hands pointing at a sketched system diagram on a dark meeting table

Finance teams often consider building their own procurement workflow on top of their ERP plus a few internal tools. Sometimes that's the right call. Usually it isn't. Here is an honest framework.

When 'build' is the right answer

Building makes sense when your procurement workflow is genuinely unique to your industry, you have a stable in-house engineering team with bandwidth, and the workflow won't need to change for 3+ years.

Examples where building can succeed: defense contractors with classified-supplier workflows, regulated medical device companies with FDA traceability needs, and a few specialty chemicals manufacturers.

When 'build' is a trap

Building is almost always a trap when the goal is 'we want it to fit our exact process.' That goal sounds reasonable and is genuinely the most expensive sentence in enterprise software.

Building also collapses when the engineering team that built it leaves.

The real 3-year TCO of building

For a 250-employee company, an honest internal build runs:

  • Year 1: $480k–$720k (2 engineers + PM + design)
  • Year 2: $320k–$480k (maintenance + new features)
  • Year 3: $320k–$480k (maintenance + integrations)
  • 3-year total: $1.12M–$1.68M, plus opportunity cost of engineering capacity

Hypothetical example.

How to decide in one meeting

Ask three questions: (1) Is our procurement workflow truly unique, or do we just think it is? (2) Will we still have the engineering team in 3 years to maintain this? (3) What is the highest-ROI thing those engineers could be building instead?

If the answer to any of those is uncertain, buy.

Key Takeaways

What to remember

  • Build only when your workflow is genuinely unique and engineering capacity is stable
  • Real 3-year TCO of internal build is $1.1M–$1.7M plus opportunity cost. Illustrative estimates, not sourced data.
  • The most expensive sentence in enterprise software is 'we want it to fit our exact process'
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