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CTO’s Software Dilemma: Make or Buy?

The share of software in the total cost of machinery is increasing rapidly, thereby taking over the top spot from more traditional cost elements like mechanics and electronics.

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Because of this, software spending under the supervision of CTOs has been growing as well, which leads to a common software development question: “make or buy?”

In order to answer this question, a CTO should first decide which software applications require unique intellectual property that resides within the company. The functional design of this proprietary software will typically happen in-house, but the development of the actual software can potentially be outsourced to reduce cost.

All other required software should be considered outside the core competency of the CTO’s organization and can be sourced from best-in-class software providers through OEM agreements. Examples of such solutions are general database/technology solutions, mobility solutions and (predictive) analytics solutions, to name a few.

Besides saving cost, this approach will also reduce go-to-market for new offerings, which can help grow market share.

The cost of licenses acquired through an OEM-agreement should be dramatically lower than the cost of developing and maintaining such solutions in-house. Because of this, it makes sense to check the OEM-programs of leading software providers such as SAP.

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