Should You Build or Buy a Customer Data Platform?

July 3, 2018
Contributor: Chris Pemberton

Consider three key factors when deciding whether to build or buy a customer data platform

After three intense days at a marketing technology conference, Tim contemplated the use cases for a customer data platform on the flight home. The idea of a single view of the customer made him excited about the potential of this technology. His organization was transforming to more customer-centric marketing, and Tim needed a plan to eliminate data silos, improve customer analytics and segmentation, and support 1:1 personalization across channels. CDPs offered all three capabilities, but left one glaring question: Build or buy a CDP? It was a critical decision on the path toward a more customer-centric marketing approach.

“What is your brand’s historical preference toward building versus buying new technologies?”

“When choosing whether to build or buy a CDP, weigh three critical factors: The degree to which your organization seeks competitive advantages through a CDP, your available resources and track record of technology development and your CDP time-to-market requirements,” says James Meyers, Senior Principal Analyst, Gartner for Marketers.

Will your brand differentiate on CDP capabilities?

Organizations streamline their marketing operations and expand personalization efforts through CDP deployments. Ask four questions to help guide your assessment of CDP’s differentiation impact:

  1. What is your brand’s historical preference toward building vs. buying new technologies?
  2. Can a third party supply greater than 80% of the CDP capabilities you need?
  3. Does your brand operate in a mature industry, increasing the need to differentiate your marketing experiences?
  4. Does your company push technical boundaries at a rate where a third party couldn’t match your pace of innovation?

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Assess CDP deployment resources and maturity

Determine your team’s skills and maturity in terms of competencies, readiness and agility. Homegrown CDPs require the full range of IT development roles, including the ability to build a business-friendly user interface. Then analyze your organization’s budget profile to shape the decision. Brands with lean budgets (<9% of revenue spent on marketing) should strongly consider buying. The cost to purchase a CDP can range from $100,000 to $300,000 annually, based on Gartner client and vendor conversations, while the labor costs to build and maintain a CDP in-house can be significantly more. Brands with aggressive budget profiles (>15% of revenue spent on marketing) should consider building a CDP in-house, given the potential to realize competitive advantages — assuming a track record exists of delivering custom solutions in-house.

Clarify time-to-market requirements

As you consider the prospect of building vs. buying, determine the urgency for deploying a CDP to your marketers. Measure current gaps in marketing performance, analyze the status of competitors’ advancements toward 1:1 personalization and determine whether existing technology can serve as a stopgap while you build a customized CDP over time.

“Marketers should ask themselves if capabilities such as unified customer data or real-time personalization enablement can create differentiation for their brand,” says Meyers.

Read more: The Marketer’s Guide to Customer Data Platforms

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