17 Jan

To buy or not to buy? That is the question

I have helped many travel companies to buy new systems across the years. It is critically important to choose the system that best suits your operation.  Choose the wrong system and you are almost guaranteed some serious business disruption.  Get this decision right and you are going to still experience business disruption, but only whilst implementing the system, and then you could have a happy company for many years ahead.  I normally suggest to my clients that they aim to change systems every five years but, actually, it is likely that their newly acquired systems will last eight years or more.  One tour operator I am working with at the moment was one of my very first clients, 20 years ago.  The system we chose and implemented back then is actually still being used, so we got that purchasing decision right!

A question I have often been asked is whether to buy or build.  Should you buy a system from a respected travel technology provider or should you get a developer or two to build your new system.  The latter approach, building your own system, sounds very attractive.  You will be getting a system that does exactly what your business needs it to do.  It will suit your operation perfectly.  Moreover, as the system is the brains and nervous system of your business, from a strategic perspective, building your own has to be good.  You will own the intellectual property rights and no competitor will be able to use it.

This sounds great but reminds me of a tour operator I worked for some years ago.  They needed a new system and had to decide whether to buy or build.  They hired a new IT Director to help with this.  He was very enthusiastic about the idea of building the system.  He did some careful financial planning and then presented some charts to the Managing Director.  His plan was to develop a new system and then recoup the cost by taking the system to market.  He drew a sales projection chart on the whiteboard.  By year four, he had system sales outstripping travel sales.  I did point out to the MD that, as a business plan, this was rather in the category of ‘pie in the sky.’  Needless to say that IT Director didn’t last very long.

On the other hand, as I am writing this I am sitting on a train on the way to visit a travel company that actually has built its own system.  I have been asked to assess whether it has been developed sufficiently well that it could be sold commercially to other travel companies and, if so, what this might entail.

My starting point to answering the ‘build or buy’ question is always ‘buy.’  Building is a major undertaking.  I reckon that a decent system needs at least 20 man years of development.  If you are buying rather than building, you are also getting a system with good all round functionality.  This is because the system will have been built up across the years from the development requests of all the travel companies that are using the system rather than one travel company building a system in isolation. There can be good reasons to build and I do sometimes recommend this, but if it is something you are thinking about, think long and hard before embarking on such a project.  You may end up just re-inventing the wheel but with some seriously crucial spokes missing.