Key points in 30 seconds
- A make-or-buy decision means choosing whether to produce an activity in-house or buy it from outside.
- Keep in-house what differentiates you; buy or outsource what is standard.
- Compare total cost, not just price: hiring, management, maintenance, lead time.
- There is a third way: buy now to move fast, bring it in-house later.
A broader question than it seems
Make-or-buy is not just an industrial question. In an SME, it applies to digital marketing, software development, accounting, prospecting, customer support and training. Whenever an activity has to be covered, there are at least three options: build it in-house, hand it to a provider, or buy a ready-to-use solution.
The five decision criteria
1. Is it your core business?
If the activity is part of what sets you apart in your customers' eyes, keep control of it. If it is necessary but identical across all your competitors (payroll, hosting, standard CRM), buying it frees up resources for what matters.
2. Total cost
In-house cost includes fully loaded salary, but also hiring, management, tools, training, absences and ramp-up time. External cost includes the price, coordination and the risk of dependency. Compare over three years.
3. Speed
Hiring and training a team takes months. An experienced provider or an existing solution can be up and running in a few weeks, or even a few days for software.
4. Control and confidentiality
Some activities involve sensitive data or strategic customer knowledge. If you outsource, set out data ownership, confidentiality and reversibility in the contract.
5. Risk
What happens if the provider disappears or the key employee leaves? An activity that depends on a single person, in-house or external, is fragile.
| Criterion | Make (in-house) | Buy / outsource |
|---|---|---|
| Differentiation | High | Low, standard activity |
| Volume | Continuous and predictable | One-off or variable |
| Expertise | Available or can be built | Rare, costly to hire |
| Lead time | Compatible with hiring | Urgent |
| Control | Essential | Can be governed by contract |
The third way: buy then make
Many decisions are not final. A common strategy is to buy or outsource at first to move fast and learn, then bring the activity in-house once volume and skills justify it. To make this possible, require documentation, skills transfer and data portability from day one.
Example: digital marketing in an SME
An SME starting its digital presence often benefits from handing strategy and setup (website, SEO, editorial guidelines) to a partner, while hiring or training someone in-house for day-to-day management. It gets the provider's speed and expertise, and gradually builds its own capability.
A decision grid
| Criterion | Lean towards make | Lean towards buy |
|---|---|---|
| Differentiation | The activity sets you apart | The activity is standard |
| Volume | Regular and enough for a role | Occasional or variable |
| Skills | Already present or easy to hire | Rare or expensive |
| Urgency | The timeframe is acceptable | You need to move fast |
| Confidentiality | Sensitive data or know-how | Risk manageable by contract |
Score each criterion from 1 to 5 for each option: the grid makes the discussion more objective.
A worked example
A 40-person SME is deciding whether to hire a developer to maintain its website and internal tools or to use a provider. Hiring means a salary with social charges, management time, tools and the risk of departure. The real workload is estimated at two days a month. A maintenance contract with a provider costs much less and covers absences. The decision: buy, with a knowledge-transfer clause, and reassess in two years if the volume grows.
Choosing the right provider
- Check references on comparable projects.
- Define service indicators: lead times, quality, availability.
- Keep ownership of data, accounts and code.
- Include a reversibility clause so you can take the work back or change provider.
- Name someone in-house responsible for the relationship, even if the activity is outsourced.
Common mistakes
- Comparing a salary with a day rate without counting the hidden costs of in-house work.
- Outsourcing an activity that is your differentiator.
- Keeping in-house, out of habit, an activity the market does better and cheaper.
- Never revisiting the decision as the company grows.
Make-or-buy applied to AI
The question now arises for artificial intelligence: develop your own tools, use market solutions such as Microsoft Copilot, or have custom agents built. For most SMEs, the right answer is mixed: market tools for common uses, targeted developments for processes specific to the company. See our guide on what can be automated. To decide on your own activities, a business consulting engagement can carry out the analysis.
Frequently asked questions
What does make-or-buy mean?
It is the decision to produce an activity in-house (make) or to buy it externally, from a provider or as an existing solution (buy).
Which criteria should guide the decision?
Five main criteria: whether the activity is part of the core business, the total cost over three years, the time required, the need for control and confidentiality, and the level of risk of each option.
Can you change your mind after outsourcing?
Yes, as long as you planned for it: documentation, skills transfer and data portability must be written into the contract from the start.
What is make-or-buy?
It is the decision to carry out an activity in-house or buy it from outside, from a provider or as a ready-made solution.
Should a make-or-buy decision be revisited?
Yes, at each growth stage, when strategy changes or when the market offers new solutions. A review every two or three years is a good pace.