Makeor Buy Analysis

The main decision you're trying to get to in make-or-buy analysis is whether it's more cost effective to buy the products and services or more cost effective for the organization to produce the goods and services needed for the project. Costs should include both direct costs (in other words, the actual cost to purchase the product or service) and indirect costs, such as the salary of the manager overseeing the purchase process or ongoing maintenance costs. Costs don't necessarily mean the cost to purchase. In make-or-buy analysis, you might weigh the cost of leasing items versus the cost of buying them. For example, perhaps your project requires using a specialized piece of hardware that you know will be outdated by the end of the project. In a case like this, leasing might be a better option so that when the project is ready to be implemented, a newer version of the hardware can be tested and put into production during rollout.

Other considerations in make-or-buy analysis might include elements such as capacity issues, skills, availability, and trade secrets. Strict control might be needed for a certain process and thus the process cannot be outsourced. Perhaps your organization has the skills in-house to complete the project but your current project list is so backlogged that you can't get to the new project for months, so you need to bring in a vendor.

Make-or-buy analysis is considered a general management technique and concludes with the decision to do one or the other.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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