In the rapidly evolving world of media technology, businesses often face the difficult decision of whether to insource by developing their own in-house platforms or outsource by adopting existing third-party solutions. The idea of complete control and customization of media technology features can be enticing, but these in-house platforms can often lead to hidden costs that have long-lasting impacts on operational efficiency and future business growth.
From initial concepting through development, deployment, maintenance, and business scale, there are countless areas where resourcing, project scope, integration planning, and business considerations can cause direct and indirect costs to skyrocket. It is critical that media company leaders evaluate these hidden costs when deciding between insourcing and outsourcing their software needs.
- Outsourcing involves contracting third-party service providers to handle specific tasks or operations on behalf of an organization. It leverages the expertise and resources of the third party to complete projects.
- Insourcing refers to delegating operations and tasks to the internal resources of an organization.
- Build vs Buy: In-house software may provide control and customization, but business leaders should consider development, maintenance, training, and opportunity costs.
- The expertise and resources of an external partner can offer significant advantages, like rapid development cycles, newer features, and advanced security measures- particularly for mid-market media companies.
Okay, so the initial development cost may not seem like a hidden cost. You know the scope of the project, the resources required, and the timeline needed to deliver. But when you dive into the details, there are clearly tradeoffs at play.
Building a scalable ad tech platform requires a considerable investment of time, talent, and financial resources. Enterprise IT teams may have the technical skills to plan what to build, develop a timeline, and get to work on it. But to make the platform truly deliver value, organizations need to allocate a dedicated cross-functional team of product managers, developers, QA engineers, project managers, and UX designers, along with the necessary engineering teams required to run the platform.
What happens if some of those resources need to be reallocated to fix an issue in a different part of the company? Or what happens if the primary solution engineer leaves the company? Consider that it could take several months to hire a replacement, and it typically takes an average of eight months for an employee to reach full productivity. Seemingly minor issues – often unrelated to the development project – can dramatically impact the delivery timeline of an insource development project.
Beyond that, project teams need to understand evolving markets, ensuring that what gets built today will satisfy the needs of tomorrow. For mature markets where there isn’t much change from year to year (a rarity in today’s business climate), in-house can often make sense. However, for rapidly-changing markets such as media, an insourced software solution may not be designed or continually resourced to meet business needs several years down the road.
Key questions to consider with respect to technology development:
- Is the media market at a steady state? Or is it evolving fairly rapidly?
- What are your specific requirements and goals for the software platform?
- Can you easily take a modular approach to deploying a new platform?
- What is your timeline for implementing the software platform? (If you need something fast, it’s usually better to look externally.)
- What level of customization and flexibility do you require from the software platform?
- Do you have the necessary technical expertise in-house to develop, maintain, and continue extending the software platform?
- What is your opportunity cost? Would this development work take away from other vital IT or enterprise engineering programs?
- What are the hardware costs? (Keep in mind that you likely need infrastructure and servers for development, staging, and production.)
Ad tech platforms have historically been difficult to implement. The massive “rip & replace” platform shifts of the past typically led to extended implementation cycles. Nowadays, solutions built natively in the cloud have the opportunity to take a more modular approach to implementation. Instead of massive change, media companies are able to implement new technologies on a specific solution by solution basis. This is an important consideration when evaluating new tools and technologies, and allows businesses to roll out new solutions with less disruption and risk than in the past. While internal teams can certainly develop cloud-native applications, cloud development and deployment with outsourced platforms can offer increased benefits that could be difficult for internal teams to match, such as rapid development cycles, new product features, security patches, and the like.
Key questions with respect to implementation:
- Can your internal tool be implemented modularly?
- What are the implementation and deployment costs? (Think rollout, documentation, and training.)
- Do you have internal implementation and success management expertise?
- Will your internal team be able to implement new product features, security patches, and functionality on an ongoing basis?
Companies that don’t allocate the full complement of resources for maintenance often experience decreased platform performance, security vulnerabilities, missing features – all of which could lead to loss of ad revenue.
Once an in-house platform is deployed, ongoing maintenance becomes a critical aspect of ensuring its smooth operation. This involves monitoring for (and quickly fixing) bugs, continuously monitoring security threats, applying security patches, and updating the platform to adapt to evolving industry standards. Maintenance costs can be substantial and often require a dedicated team to address issues promptly.
Companies that don’t allocate the full complement of resources for maintenance often experience decreased platform performance, security vulnerabilities, missing features – all of which could lead to loss of ad revenue. Over time, bugs accumulate, causing frequent disruptions in ad delivery and negatively impacting user experience. Companies can fall into the “break-fix trap”, only providing additional resources for emergency fixes. If they aren’t fully invested in continually evolving the platform, those companies often need to divert valuable time and money away from other strategic initiatives in order to keep the platform running.
Key questions regarding maintenance:
- What is the 5-year total cost of ownership (TCO) for build vs buy, considering development, maintenance, and ongoing support?
- Will you commit to ongoing development of the new internal platform? What is that annual budget and resourcing plan?
- What are the security and data privacy considerations for both options?
Ad tech is a complex ecosystem with numerous interconnected systems and data streams. Integrating an in-house platform with other technologies, such as demand-side platforms (DSPs) and data management platforms (DMPs), can be a daunting task. The absence of standardized interfaces and protocols can lead to compatibility issues, necessitating custom 1:1 integrations and prolonged development cycles. The tech stack can quickly turn into a spaghetti stack.
These integration challenges often result in unexpected expenses and delays, impeding the platform’s overall effectiveness. And when one piece of the technology stack is updated, the connections between systems can become broken – meaning the IT teams need to then update all of the existing 1:1 connections.
Key questions to consider about integrations:
- Will the software platform need to integrate with your existing systems and infrastructure? (your answer is likely “yes!”)
- Who manages all of the connections and how do they do it?
- Will you have future needs to expand upon the integrations? (for example, expand a “read only” to a “read-write”?)
- What is the cost to set up and maintain a single connection? Twenty connections?
In the media industry, in just the last 10 years, we’ve seen programmatic, programmatic guaranteed, private marketplaces, and various other selling methods – all used to support new business models (OTT, CTV, FAST, Retail Media, etc.). The one constant is change.
As business needs evolve and ad volumes increase, scalability becomes a crucial consideration.
Scalability should be considered from a technical sense and a business sense. On the technical side, in-house platforms may struggle to accommodate sudden spikes in orders, change orders, or content being managed. Scaling a custom-built solution often requires extensive modifications to the existing infrastructure and significant investments in hardware, cloud services, or data centers. Failure to scale effectively can result in performance bottlenecks, slow response times, and missed opportunities.
On the business side, it’s critical that your Order Management System be flexible and scalable enough to support evolving trends and workflows. In the media industry, in just the last 10 years, we’ve seen programmatic, programmatic guaranteed, private marketplaces, and various other selling methods – all used to support new business models (OTT, CTV, FAST, Retail Media, etc.). The one constant is change. Tools and platforms need to be able to react quickly to those changes.
Key questions regarding scalability:
- How many users will you have in 3-5 years?
- Will you need additional functionality to support new business workflows?
- How quickly would you able to scale an internal solution in terms of infrastructure such as hardware or cloud services?
- What language support will you need in 3-5 years?
While the initial allure of owning and controlling a custom-built media tech platform is undeniable, businesses need to consider the associated hidden costs. The development costs, ongoing maintenance, integration challenges, and scalability limitations can have a significant impact on both financial resources and operational efficiency.
Be sure to assess your situation fairly and honestly. Is your in-house solution going to power your business for the long haul, or is it a short-term stopgap? Think through where you want your business to be in 2, 3, or 5 years. Can you insource the platform development, or will it cause limitations as well as increased costs as your business evolves and scales? Evaluating the associated costs and tradeoffs throughout the entire technology cycle will help you make a more informed business decision – and hopefully avoid unpleasant surprises down the road.