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Build for Competitive Advantage; Buy for Competitive Parity

February 20, 2009 Comments off

ThisĀ  is a well-known business mantra. If WalMart competes based on its supply chain, then it shouldn’t outsource its supply chain to FedEx. Alternatively, Family Dollar, or other companies in the retain industry, may have a reason to outsource logistics if that is not how they intend to compete.

This philosophy is not always properly reflected in the world of IT. IT architecture and priority decisions must follow the strategy of the company:

  • Build applications that enhance or automate a process that is a competitive advantage for the firm.
  • Buy applications that only need to provide competitive parity for the firm.

For example, Walmart should (and probably does) build their own logistics tracking and forecasting applications, while they probably purchase their HR management tools.

For every IT project, this distinction should be clear.

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