Build vs Buy: Using TCO As A Guide

A practical guide to evaluating tech stack augmentation

With the advent of hundreds or thousands of options in the Sales Tech and MarTech landscape. The inner tech-forward-geek in me absolutely wants to look at the latest and greatest. Many execs and sales leaders grasping for silver bullets or turnkey solutions. It’s human after all to drift towards the path of least resistance.

Who wouldn’t want a set of solutions that will…

• Automatically calculate commissions

• Enrich prospect and company data

• Route prospects to the appropriate hands at the right time

• and on and on

But it helps to take a step back to look at the big picture.

Sales and Revenue Operations would benefit by thinking like a CFO at times. As a CFO, decisions are deeply embedded to strive for difficult outcomes under financial and operational constraints. Startups, in particular, must operate within designated budgets.

So where does that leave the Sales Operations leader. Is the answer to reach for the seemingly easy answer? Or is there a more cost effective way to extract value?

There are thousands of tools in the Sales Tech and MarTech. With the sheer number of options out there it’s convenient to become lost with all the options available. Remember, companies operate in an environment of finite resources.

Finite budget.

Finite capacity.

Finite skill set.

Finite time.

With that said, Sales Operations should be forced into an ownership and project management mindset. The first consideration is to look at the ownership concept. One practical mindset is to apply a simple equation when deciding to proceed with a new platform, it’s called Total Cost of Ownership (TCO):

"Total Cost of Ownership" <
"Present Value of Future Incremental Sales" + 
"Present Value of Status Quo Cost Savings" 

There are several components comprising TCO, such as:

1. Implementation fees

2. Software fees: usage or user based

3. Time consumed by the team in the form of (implementation, vendor evaluation, change management, configuration, enablement)

4. Identifying and training individuals to admin the tool

5. Switching Costs
   

In future posts we’ll break down how to roadmap a technology stack that works for companies along different stages of their maturity cycle.

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