Vose SoftwareModelChoice decision tree · Technology
Software Platform Build vs Buy
Build a software platform, buy a licence, buy and customise one, or use open source?
From the model’s decision tree
Best first decision: Buy Commercial License
The expected value of each first option when every later decision is also made well (the tree rolled back).
| First decision | Expected value | |
|---|---|---|
| Build Custom Platform | $1,917,500 | |
| Buy Commercial License | $9,380,000 | ✔ best |
| Hybrid (Buy + Customize) | $5,065,000 | |
| Use Open Source | $8,312,500 |
| Measure | Value |
|---|---|
| Expected value of the best strategy | $9,380,000 |
| Chance of a loss on the best strategy | 20.0% |
| Best outcome on the best strategy | $13,250,000 |
| Worst outcome on the best strategy | −$500,000 |
S-curve (cumulative probability) of Buy Commercial License from the saved simulation.
The decision
A technology company needs a new software platform to serve its growing customer base. The platform must handle user management, data processing, and analytics. Management must choose between four approaches:
- Build Custom — full control but high cost and delivery risk
- Buy Commercial — fast deployment but ongoing license fees and fit risk
- Hybrid (Buy + Customize) — balance of speed and customization
- Open Source — low upfront cost but community dependency risk
How the inputs are linked
Dev Team Cost, License Fee, Revenue per User, and Expected Users are defined once and referenced by multiple branches. Changing unit economics instantly updates all paths.
The inputs that drive several branches at once:
- Dev Team Cost — used in build path (x BuildYears) and delay penalty
- License Fee — used in buy and hybrid paths
- Revenue per User × Expected Users — drives all revenue terminal values
- Annual Maintenance — ongoing cost in build, buy-customized, and hybrid paths
- Customization Cost — used in hybrid upfront and buy-customize decision
- License Renewal — annual fee in buy and hybrid scenarios
The decision tree
The tree has 2 decisions, 4 chance events and 13 outcomes. The best path is open: at every decision the best choice is marked, and the expected value beside each branch counts every cash flow from the start. Open any other branch to see what follows it.
DecisionChance event+$ cash flow on the branch
Build Custom Platform −$4,000,000expected $1,917,500
Chance: Build Outcome- 25% On Time, High Adoption +$14,250,000payoff $10,250,000
- 45% Delayed, Moderate Adoption +$6,400,000payoff $2,400,000
- 30% Over Budget, Fails −$1,750,000payoff −$5,750,000
Buy Commercial License −$1,500,000expected $9,380,000 ✔ best
Chance: Commercial Platform Fit- 40% Good Fit +$14,750,000payoff $13,250,000
40% Needs Customizationexpected $10,450,000
Decision: Customization Decision- Invest in Customization +$11,950,000payoff $10,450,000 ✔ best
- Live With Limitations +$6,000,000payoff $4,500,000
- 20% Poor Fit +$1,000,000payoff −$500,000
Hybrid (Buy + Customize) −$2,300,000expected $5,065,000
Chance: Hybrid Integration Outcome- 30% Seamless Integration +$12,750,000payoff $10,450,000
- 50% Moderate Issues +$6,500,000payoff $4,200,000
- 20% Integration Failure +$1,450,000payoff −$850,000
Use Open Source −$600,000expected $8,312,500
Chance: Open Source Outcome- 35% Strong Community Support +$15,250,000payoff $14,650,000
- 40% Adequate Support +$7,750,000payoff $7,150,000
- 25% Project Abandoned +$1,900,000payoff $1,300,000
Change the numbers. Open the workbook with ModelChoice, change a probability or a cost in the tree, and the best decision updates at once.
Key assumptions
| Assumption | Value | Notes |
|---|---|---|
| Dev Team Cost (per year) | $2,000,000 | Fully loaded engineering team annual cost |
| Build Duration (years) | 2 | Time to build custom platform |
| Commercial License Fee | $1,500,000 | Upfront license for commercial platform |
| Annual License Renewal | $300,000 | Yearly license renewal cost |
| Customization Cost | $800,000 | Cost to customize commercial platform |
| Annual Maintenance Cost | $400,000 | Ongoing maintenance and support |
| Expected Users (Year 1) | 5,000 | Projected users in first year |
| User Growth Rate | 30.0% | Annual user growth rate |
| Revenue per User (Annual) | $500 | Annual revenue generated per user |
| Projection Years | 5 | Financial projection horizon |
| Open Source Integration Cost | $600,000 | Cost to integrate and harden OSS solution |
| Open Source Support Cost (Annual) | $200,000 | Vendor support and internal OSS expertise |
The figures are illustrative: the companies and numbers are invented for teaching.
Try it in ModelChoice
- Increase Revenue per User. Watch all paths become more attractive
- Double Dev Team Cost. See the build option become less competitive
- Lower License Fee. Buy and hybrid options improve together
- Run Sensitivity Analysis. Find which parameter drives the decision
Find similar models
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Further reading
Download the workbook and open it with ModelChoice. The free trial opens every example.
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An illustrative example: the figures are invented for teaching. Last updated 9 October 2026.