NIH syndrome is an acronym for not-invented-here syndrome. In software, NIH is commonly referred to as reinventing the wheel (i.e. building something that is already available).
NIH syndrome is based on the in-house belief that in-house solutions are better suited, more secure, more controlled, quicker to develop, and incur lower overall cost (including maintenance cost) than using existing solutions and tools.
Below are three NIH risks to consider.
Risk 1: Expenses
In software the mantra is:
It’s cheaper to rent than own
Why? Because of the high, all-inclusive costs (TCO) to build and maintain enterprise level software.
Like in-house owners of software, specialists builders and renters of software bear big capex up front. Unlike in-house owners of software, these specialist software businesses are able to charge a lower price point per user.
Why? Because the expense pain of specialist software businesses can be spread over many users, across many companies, in an industry. On the other hand, software owners who build inhouse, have only one company, with relatively few users, to carry the build and maintain expense burden.
The result: businesses who rent software make more money, and operate more efficiently than those who don’t.
Risk 2: Getting “left behind”
Innovation is incredibly expense. Research and development results in many failed experiments. Specialist builders and renters of software, in their quest to provide an excellent product, have to take this pain. They are however fortunate in that they are working with a wide variety of customers (each providing many ideas), can employ a wide variety of talented people, and can focus exclusively on one thing – providing great software.
It’s thus very difficult for one company, building inhouse, to keep pace with the production innovation of specialist software provider.
Risk 3: competitive strategy
Think about the Apple iPhone.
What is your core business, what is the product you are offering to customers?
While the buyers of Apple think Apple makes everything, Apple’s genius is that they are mere assemblers. An Apple iPhone is designed in California, everything else is outsourced. An iPhone is therefore a combination of various components made by a diverse range of manufacturers. Apple (and others) avoid NIH syndrome, and instead scour the globe for best in breed providers of the components they need to deliver a great tool.
The “rent vs own” decision
A good first step in evaluating this (sometimes emotional) rent or own decision is to categorise a business’s software needs and solutions into two:
- What tools or processes need to be customised, and
- What processes can be supported by industry-wide or generic use cases and tools (i.e. “engine room” software)
Building software tools inhouse (sometimes, but not always, in conjunction with specialist developers) makes sense where customised solutions are a pre-requisite for that business’s success.
Example of such customised tools for the CRE industry:
- Customer marketing “shop fronts” such as websites or brochures, or
- Low tech solutions requiring unique intellectual property (such as Excel spreadsheets to analyse lead source and deal conversion data)
In many cases, custom tools are not required to provide a competitive advantage. Sometimes the difference can be the unique application of generic tools. For example, the implementation of unique SEO strategies, or use of auto-mailer engines with your data assets.
“Engine room” software
It makes financial and operational sense to rent “engine room” software.
Good “engine room” systems will generally allow for some form of customisation, and are built with stable and well documented APIs. This make it possible for customers to extract additional value to their competition by adding their custom “cherries on the top”. These customers are simultaneously able to sidestep the capex and maintenance issues that come with “reinventing the wheel”.