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5 Factors to Make the Right CDP Buy or Build Decision

Customer data platforms (CDP) are proving their value by helping companies better target marketing activities and share actionable insights across the business. But there is more than one way to access the benefits of a CDP. Some businesses may choose a software as a service (SaaS) or platform as a service (PaaS) CDP solution. Others may opt to build their own cloud-based CDP. Each avenue has its pros and cons.

Let’s look at the five key factors to consider in order of priority when making a buy or build decision.

Guest Contributor

Allison Hartsoe

1. Time to Market

When do you need your CDP?

A need for speed will dictate whether you choose to buy or build certain components. If  you need your CDP up and running quickly, SaaS is the best option. Most software can be deployed and quickly integrated without the need for additional technology resources.

Custom-built CDPs on the cloud can take months to develop. And like many “construction” projects, you may miss your deadlines. It should be no surprise that the larger the custom proportions in the project, the longer it takes.

Often, a CDP has to be constructed from existing systems and must be running to collect data from campaigns those systems are already serving. If there is an event coming up that will represent a large data capture opportunity, you should probably go with something plug and play. You can always hybridize or start to build components as you go, and the right SaaS vendor will discount their product for purposes of a proof of concept.

Header 2. Total Cost of Ownership

How much will your CDP cost overall?

SaaS/PaaS pricing is (usually) predictable and transparent. Most software packages clearly define costs up front, enabling you to avoid budget overruns. You will know if the price is fixed or if it is based on the number of monthly users, etc. Keep in mind, however, that SaaS connects your business to features and functionality—and the more they deliver value, the more you may become locked in. It might be worth sacrificing flexibility if the results are good, but all the same, review the rights a vendor has to change prices so you can get a full picture.

A custom-built CDP is the opposite. Pricing is estimable, but rarely predictable. There’s a commonly held belief that a custom-built CDP will pay for itself over time. That is often true, but always depends on how you account for cost. The true costs of a custom system will reveal themselves once you can better understand what the project will require. The investment may or may not pay for itself on the first go once you add things like resource allocation. A custom CDP will require a dedicated team, which means you’ll have to pull away developers from other projects or hire new ones. What will you be giving up if you do that? Custom’s advantage is once you build and staff it, the total cost of ownership does not include margin to feed the profits of SaaS or PaaS vendors, and so the TCO is usually much lower, and it has a lower cost of change. The road can be rocky, but the destination may be much better. Make sure to always build on abstracted systems, and use a major public cloud to tap into a higher supply of talent that can operate your system from the inside.

3. Features and Functionality

How well do existing tools meet my needs?

CDPs should never be a monolith. You can create a CDP by integrating multiple systems that your business already relies on or laying the new system on top of these integrations. The features and functionalities that exist in your SaaS and PaaS will be the only factors that limit the potential of your CDP. The extensibility and cost of integrations spring from the vendor’s technical decisions. When choosing a SaaS approach, you can certainly shop around based on features and functionality, but don’t be afraid to challenge your technology partners around their approaches to data ingestion and how long integrations will take.

The newest and most technologically advanced CDPs are taking advantage of the most modernized relational database methods. Some software vendors are even willing to create a feature or integration for you. Regardless, you are buying their platform. No matter how much a salesman wants to frame it as your platform to-be, the product team will never relinquish control of their software except on their terms.

With a custom solution, you have unlimited flexibility to create a project to meet your goals. Custom componentry can often be the only way to get exactly what you need and want. Just remember that generally, flexibility is inversely related to complexity. If you expect to make many pivots within your business, the number of changes is an important consideration. You shouldn’t go with a package if you think your needs will fluctuate significantly away from the roadmap for that platform in the coming years.

Similarly, a custom solution is best when your executive team has a clear vision of what they expect a CDP to accomplish. Is the business struggling with retention? Are customers putting fewer items in their carts? Is an acquisition channel costeffective? Not only will this help you measure the impact of your custom CDP but it could also create competitive advantages by grooming the data for better analysis on its way into your custom CDP.

4. Knowledge and Expertise

Do you have the people and the expertise to make your CDP as good or better than “off the shelf”?

If you are serious about becoming a technology company, your choice about your proportion of buy or build is an important one, and will always slowly lean more toward “build.” Are you looking to simply digitize aspects of your business using technology, or truly digitalize into business models and processes that are themselves technological? Software platforms are great at upfront digitization, but only a custom solution can fully digitalize your business.

A SaaS or PaaS CDP solution will give you a combination of technology and expertise that you may not have in-house (e.g. do your people know SQL?). Your package may also include a dedicated customer service person to help you get the most out of your solution. If that option is not offered, you could ask for such a person as part of your negotiation. This allows you access to talent you may not be able to recruit yourself.

With a custom CDP, you will have to assemble experts or work with a partner that can give them to you. This will require determining which functions are core (or going to be core) to the business. You may not need a dedicated customer support representative, but you may need to hire a technologist or data scientist who can do custom data analysis. The right team will help to maximize your investment in a custom CDP.

In either case, to extract value from data, someone must sit at the intersection of your business technologies, goals and processes. This person can unlock the value of your data by supporting simple internal changes and also can envision new ways to build value from your data. With a custom CDP that will be a key internal hire. With a SaaS or PaaS solution, you may find a blend of their customer service and your internal skills fit the bill.

5. Core Competence

How central is the CDP to your business?

Will having an in-house custom solution work to your advantage? If you consider the way you use and activate customer data outside of your core, but still something your business needs to do, SaaS and PaaS solutions might save you some headache and risk. Everything you need is ready right out of the box. But if you consider CDP core to the future of your business, you will need to build.

Building your own CDP allows you to learn faster about your customer base as long as you have engineers to keep it running, talent to analyze the information for your specific business, and the leadership vision to choose which challenges you will act on first.

Keep in mind, even behemoth tech companies who could build anything they want still use PaaS/SaaS. But the way they collect, activate and use customer data is as proprietary as it can get to those platforms you might want to look more like, in the future. You (like the tech giants) will need a dedicated team of engineers to run your one view of the customer, and not farm out functionalities you want to invent yourself, to partners providing it to you for a fee.

Take some pressure off yourself with this consideration and keep in mind that the solution you pick surely will evolve over time. You may opt to start with a SaaS package so you don’t have to hire engineers on day one to prove results, but have a future plan for building a custom solution with engineers to support it as you digitally transform.

No matter which path you choose, keep digital identity in mind.

When you are ready to decide whether to buy or build, keep in mind that multiple organizations within your business may be embarking on CDP journeys. You don’t want to get in the way of those teams and their technology choices, but it is important to work as an organization to set a common data model for handling digital identity.

Leaders must create a strategy for how to handle customer identity as an enterprise. Any software platform or custom solution can adopt such a digital identity framework. Different parts of your business can build according to their own needs while everyone collects, stores and shares data in a way that preserves interoperability and combinable metadata.

Many digital transformations fail in part because leadership did not consider establishing standards to unify different workstreams, upfront. You can’t go back in time and collect data, nor can you always retroactively transform your data to be apples to apples after you have five different CDPs, collection and storage methods. Especially as data privacy legislation matures, leaders should recognize the need to balance all of the considerations in this article so their teams can have the best of all worlds. But before you make a decision, the best thing you can do to reduce risk and move with confidence is to set a digital identity strategy.

  • About Allison Hartsoe

    Guest author Allison Hartsoe is the host of the Customer Equity Accelerator Podcast and CEO of Ambition Data, a technology and services firm that helps each direct-to-consumer company grow a healthy business with customer-centric analytics.