Should You Build or Buy Software Solutions?

As oil & gas technology professionals, we often find ourselves in discussions on whether oil and gas companies should build software in-house or buy third-party solutions. Outlined below are many of the pros and cons that entities should consider.

In-House Solution Benefits

  • Building in-house software can create a proprietary advantage vs. peers in an industry increasingly trending towards a manufacturing approach with fewer differentiators.
  • Can position your organization as an industry leader on efficiency, which can translate into a very real cost of capital advantage. However, this advantage can be short-lived if the benefits of the investment are not reflected in results or if the benefits are not long term in nature.
  • Don’t need to spend time bringing a third-party up to speed on operational complexities and unique considerations. The interconnected nature of oil and gas operations can make it difficult for industry outsiders to provide practical insights.
  • All solutions are stored on existing systems and designed to accommodate internal IT approaches and constraints.

 

Third-Party Solution Benefits

  • Users receive a data advantage, regardless of size. Third party solutions make generalized learnings from pooled client data, while in-house solutions are only as good as their data set. Small and medium size organizations often don’t have enough data to generate useful insights and develop effective AI models.
  • Product innovation occurs proactively rather than reactively. Third-party providers build their solutions by leveraging experience with industry peers. This means they often already have solutions when problems arise for clients. In contrast, in-house software innovation often only occurs in response to recent problems (companies in this market don’t have enough money to pay to solve problems they don’t yet have).
  • Able to provide solutions at a lower cost, as the cost of a development team is spread across several clients. It is difficult to build software in-house economically because of the challenge of attracting top experts, and the need to retain them for your solution to be effective.

 

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Mark Le Dain