Definition
Build vs buy is a decision framework product teams use when they need a capability that could either be developed internally or acquired from a third-party vendor. The decision hinges on four criteria: whether the capability is a core competency, the time-to-market pressure, the total cost of ownership (including maintenance), and the strategic importance of controlling the technology.
Slack, for example, built its own real-time messaging infrastructure because message delivery is fundamental to its product. But Slack bought Screenhero for screen sharing rather than building it from scratch -- screen sharing was valuable but not the core differentiation. That distinction drives most good build-vs-buy decisions.
Why It Matters for Product Managers
PMs own this decision more often than they realize. Every time a team evaluates an analytics tool, a notification service, a payment processor, or an AI model provider, there is an implicit build-vs-buy choice. Getting it wrong is expensive in both directions -- building what you should have bought wastes engineering capacity, while buying what you should have built creates vendor lock-in on a critical capability.
The decision also has compounding effects. Shopify chose to build its own checkout infrastructure early on. That decision felt expensive at the time, but it later enabled Shop Pay, which now drives 10%+ higher conversion rates for merchants -- a competitive advantage that would have been impossible if checkout was outsourced to a third party.
How It Works in Practice
Common Pitfalls
Related Concepts
The AI Build vs Buy framework applies this thinking specifically to AI/ML capabilities, where the build-vs-buy tradeoffs are especially sharp. For quantifying the financial side, see Cost-Benefit Analysis. Understanding technical debt is essential because building in-house always accumulates maintenance burden over time.