Buy vs. Build: How to make informed decisions as you invest in AI

Generative AI: Navigating the Landscape 

In today's dynamic financial services market, generative AI stands at the forefront of technological advancement and innovation, offering unprecedented opportunities for growth and efficiency. As AI continues to gain traction, a critical question confronts businesses: Should they invest in a ready-made AI solution or undertake the challenge of building a custom system in-house? This decision involves more than simply selecting a provider; it involves the business strategically understanding how to align AI with its specific needs, goals, resources and constraints. AI has the potential to significantly impact every aspect of business operations, so the buy vs. build debate has become even more critical and timely.  

Should You Buy or Build? 

There are many factors to consider as you evaluate which path is right for your firm: 

Building In-House: Creating a generative AI solution in-house involves many factors, from financial investment to talent acquisition to infrastructure requirements and technology vision. The commitment extends beyond development; a firm also must consider ongoing maintenance, evolution and future innovation in response to fast-paced AI advancements. This path may suit organizations with specific, narrow or proprietary use case or security requirements where off-the-shelf solutions can’t meet their precise requirements. 

Buying a Solution: In contrast, selecting an existing AI solution can be a more feasible and flexible option, particularly for organizations that don’t have vast resources or require a completely bespoke system. This route allows firms to quickly harness AI's capabilities with less strain on internal resources. The critical factor here is choosing a solution that aligns well with your organization's vision, needs and industry requirements. But how can you assess which solution is right for your firm? 

Key Considerations When Selecting an AI Solution 

• Integrated AI Ecosystem: AI solutions must integrate seamlessly with existing infrastructure and complex systems. Look for a solution that has pre-built connections to critical tools and applications, like internal chat tools, CRMs, research systems, file systems, and market data providers, to ensure the AI solution will complement and enhance current workflows without causing operational disruptions. 

• Adaptive and Future-Ready AI Architecture: Be sure to select AI solutions with flexible and scalable architectures that can adapt to rapid technological advancements and changing market conditions. This adaptability is crucial for the long-term viability and relevance of your AI investment, particularly in the dynamic financial services sector. 

• Ability to Strategically Customize: It’s vital that any AI solution can combine customization with flexibility to support unique strategies and provide a competitive edge. AI solutions should align with specific business goals, be able to address priority use cases, such as investor and client relations, portfolio monitoring and investing, or firmwide productivity goals, and be adaptable to future requirements. 

• Expertise in AI and Market Dynamics: External AI solutions should help bridge gaps to in-house expertise, particularly when it comes to the complex interplay between AI technologies and financial market dynamics. Look for solutions that are purpose-built and can make AI work for this space to ensure effective implementation and long-term success.  

• Uncompromised Security and Compliance: Any AI solution must meet the highest security, privacy, and compliance standards of our space.  Look for solutions that create a sanctioned and safe environment for you to use LLMs and AI-based technology, including a full 17a-(4) audit of LLM interactions; are SOC2 Type 1 certified; and fully leverage OAuth2 standard for user permissions. 

• LLM- Agnosticism: Leveraging LLM agnostic models offers firms the immense benefits of optimization, customization and resilience. Optimization is particularly crucial as it allows users to select the right model for each specific task based on its strengths and weaknesses, ultimately driving better outcomes for the organization. Avoiding dependence on any one LLM means if there is an outage with that LLM, your businesses can quickly pivot to an alternative without significant disruptions or performance issues.  

Having started my career at a number of firms where the bias was to build vs. buy, I have seen firsthand the cost outlay and pros/cons of those decisions.  In cases where we were building tooling that was focused on alpha generation, leveraging proprietary data and models, we rightfully chose to build.  In cases where a vendor solution couldn’t meet our needs and had no roadmap plans to get there, we were forced to build.  In other cases, such as driving efficiency for the firm with productivity tooling, we recognized that a vendor would build wider, deeper, and faster than our team could: we had to spend our time on other business priorities. 

Planning Your AI Future  

Whichever route you choose, your AI solution must be able to adapt to the dizzyingly fast-moving AI landscape and be ready for what are undoubtedly new regulations coming down the road. If your organization lacks the appropriate resources to build on your own, you have many options to collaborate with external experts who can provide strategic guidance and out-of-the box solutions.  

Buying or building an AI solution is nuanced and any decision should be informed by a thorough understanding of your organization's needs, capabilities, and long-term strategy. It's a decision that warrants careful consideration, balancing the benefits of rapid deployment and industry alignment against the need for proprietary customization and control.