The ‘Build vs Buy’ Debate Is More Complicated Than Many Firms Realize

The modernization of business-to-business (B2B) payments continues even as the pandemic ebbs, with the reliance on the paper check receding.

Omri Mor, co-founder and CEO at Routable, told PYMNTS’ Karen Webster that the digitization of business payments and changing supply chain dynamics are spurring an ongoing conversation between buyers and suppliers.

While it’s true that buyers and suppliers have an incentive to collaborate on payment methods, establishing new payment methods also sparks different conversations within the companies themselves.

As Mor said, the initial conversation centers around the “build vs. buy” debate. Technological advances have made it relatively simple to get the transaction flows in place, and most firms can patch together three or four tools to get to a faster, more reliable payments function up and running — essentially building what they need in the background.

“Many companies say they want [payments functionality] customized and tailored to their brand,” Mor said. But given just a bit of time, the challenges mount — DIY is not always the best answer. The lack of communication between, say, the finance and the engineering departments can lead to some knotty problems.

Mor said that too many firms make a “build” decision where there’s an in-house lack of expertise on payments, and they do not understand the amount of work that needs to be done.

Among the key questions to ask: Are there enough engineering resources on hand? Does the company know what it wants to build?

See also: DIY Systems Hold Back Growing Enterprises That Need to Make Payments at Scale

Tech Isn’t One-Size-Fits-All

Mor told Webster that off-the-shelf payments solutions, especially at enterprise scale, simply cannot be customized as adroitly as some companies might need. He estimated that there’s always a level of customization that adds 10% to 15% in costs and time on top of the sticker price.

Consider the inefficiencies that might happen when the engineering team is told to develop payments in-house — but not that data need to be communicated to the enterprise resource planning system. What winds up happening is that teams get frustrated with one another, Mor said.

“If you don’t identify what is not working, it’s hard to make a decision on how to proceed,” he continued. Or, ultimately, the company might go down the wrong path, investing significant time and money into tech infrastructure that needs to be scrapped in a matter of months.

The issues become more acute as companies mature and commercial payments become more complex.

That work — months of it — might be streamlined, or even bypassed (in favor of “buying” a provider, such as Routable’s expertise) if all of the company’s stakeholders have a fruitful conversation right at the start.

Embracing the Partnerships 

Mor added that by partnering with providers like Routable, firms can focus on what’s not working, which can then lead to better product and process transitions within companies.  Once a company’s executives understand the vendor and customer onboarding conversation, then they can move into payments, he said.

“Buying is still a better long-term solution, in my opinion, than investing in that infrastructure,” Mor said.

That’s especially true when examining the maintenance and updates. Outsourcing at least some of those functions takes the onus from a firm to monitor — and ideally, be proactive — about changes in compliance, regulation and operating rules.

Read more: For Smoother Cash Flow and Easier Month End Closes, Payment APIs Might Be the Trick

Of course, choosing the right provider is a process with its own potential pitfalls. As he noted, one client within Routable’s client roster came to the company after having partnered with a payment specialist that had expertise with consumer payments — but not B2B payments.

“Any time you talk about building in-house, you need to start thinking about KYC [know your customer], KYB [know your business] and transaction monitoring,” he said. That means more than just worrying about moving the money.

With most providers and platforms today, he said, it’s possible to check the proverbial “box” for security and compliance — and for finance and engineering — that satisfies most teams within a company without making them feel overburdened.

“You won’t be missing your deadlines because you’re burning energy, so to speak, in order to build an in-house tool,” Mor said.