BUY, BUILD OR BORROW

Why borrow wins every time in a world of pain

When it comes to building a business, you need systems and controls. In financial services today this means technology, known to all as “fintech.” Others recognise the pain of IT – it must work, otherwise your business fails.


So how do you go about it? Do you build your own software? How long does it take (unknown) what are the costs (unknown) and will it actually work? Should you stick to the core business, or expand and diversify? Apple famously build everything for themselves, and do not look for partnerships. But Apple Buy Now Pay Later ABPL has just pulled out of the build your own, after nursing millions of losses, as it worked out the reputational risk of getting it wrong could outweigh the control benefits. Was it a phone call from the FCA to Tim Cook, the Apple CEO that made him cough? Sainsbury’s bank is another study in failure, being sold for negative £125m, after four years of painfully trying to offload it, only to allow themselves to revert to what they know best – selling groceries.


Or do you buy another company that already has the software? Look at Invesco and Intelliflo – this can take you into new markets, but the risks are that you get sold a pup, pick up liabilities, find skeletons in the attic or, as an uncle of mine discovered when buying a house just outside Johannesburg, you discover that the building is cheap for a reason: his got whacked by lightening strikes five times in his first year.


In most cases, partnership deals win, and here’s how. First of all, they cost very little, secondly they give the main business a revenue share, and finally they can be copied. And we all like to copy.

The key is that if you hire the tech in, you can get a view on what exactly you need, particularly as AI begins to march into financial service platforms. And as a starter, that’s a good place to be. Go borrow

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