A PROCESS MODEL OF MAKE-VS-BUY DECISION-MAKING - THE CASE OF MANUFACTURING SOFTWARE

The decision to develop (make) a product or process internally or to purchase the relevant technology (buy) is one facing many organizations. What has been written about make-vs.-buy decisions usually consists of generic checklists of dubious relevancy to the decision maker's specific situation. Since the literature offers few clues as to how decisions are actually made, development of a process model based on a class of such decisions seemed to be in order. The make-vs.-buy decision for manufacturing software was the focus of this study. In-depth cases studies in seven organizations were conducted, guided by a series of key issues pertaining to the process of strategic decision-making. Experience gained at eight other sites added to the analysis and development of a model. The study found that make-vs.-buy decisions are treated in various ways. Of special interest was the recognition, in some organizations, of made-vs.-buy decisions as opportunities to develop or support an existing competitive advantage. In such firms, the entire approach and decision-making style were oriented towards achieving such an advantage. Organizations that did not view the make-vs.-buy decision as such an opportunity tended to utilize precedents and were often dominated by cultural values that sought professional peer approval. The failure of several firms in the study to see make-buy as an opportunity to achieve competitive advantage appeared to be linked to a failure on the part of technical workers and middle-level managers to fully understand and appreciate top management's strategy and goals.