Buy Sources Research: Make-or-Buy Analysis and Market Research
PMBOK v8 Definition
Buy Sources Research is a data-gathering and decision-making process within Procurement Management that involves gathering and organizing data about product requirements and analyzing them against available alternatives, including the purchase or internal manufacture of the product. A make-or-buy analysis results in a make-or-buy decision as to whether particular work can be best accomplished by the project team or if it should be purchased from outside sources. Market research is a complementary data-gathering technique that includes examination of industry and specific seller capabilities, leveraging information gained at conferences, online reviews, and a variety of sources to identify market capabilities.
Process Group: Planning | Knowledge Area: Procurement Management
Why It Matters for the Exam
The PMI exam frequently tests make-or-buy analysis because it is a critical decision point that impacts project cost, schedule, risk, and procurement strategy. Questions typically appear in Planning process group scenarios where project managers must decide whether to build internally or buy externally, and in Procurement Management questions that test your understanding of how market research informs seller selection.
Key Points to Remember (for the exam)
- Main Input: Product requirements and available alternatives (internal vs. external capabilities)
- Main Output: Make-or-buy decision (which work is best accomplished by the team vs. purchased from outside sources)
- Key Tool: Make-or-buy analysis (decision-making process of gathering and organizing data)
- Key Tool: Market research (examination of industry and specific seller capabilities)
- Common Confusion: Confusing make-or-buy analysis with source selection analysis → Make-or-buy analysis decides what to buy; source selection analysis decides who to buy from
- Critical Link: Make-or-buy decisions are connected to the procurement strategy and contract type selection (fixed-price vs. T&M)
- Key Trigger: Organizations make a buy decision to outsource if they do not have the in-house infrastructure or technologies needed to internally complete the project
Typical PMI Exam Example
A project requires specialized software development. The project team has limited experience with this technology and lacks the necessary infrastructure. The project manager conducts a make-or-buy analysis, determines that internal development would require significant training and tool acquisition, and recommends purchasing from an external vendor. This decision is documented as the make-or-buy decision and feeds into the procurement strategy.
PMI Exam Traps
- Trap: Thinking make-or-buy analysis only considers cost → Reality: It analyzes product requirements against available alternatives, including capabilities, infrastructure, and technology
- Trap: Confusing market research with make-or-buy analysis → Reality: Market research examines seller capabilities; make-or-buy analysis decides whether to buy at all
- Trap: Believing make-or-buy decisions are made once and never revisited → Reality: These decisions are part of the planning process and can be revisited as project conditions change
- Trap: Assuming "make" is always cheaper → Reality: Organizations may choose "buy" when they lack in-house infrastructure or technologies, even if internal costs appear lower
Important PMI Connections
| Related Concept | Relationship Type | Exam Attention Point |
|---|---|---|
| Procurement Strategy | Direct Output | Make-or-buy decisions are connected to procurement strategy; for buy decisions, tailoring selects appropriate contract type (fixed-price or T&M) |
| Source Selection Analysis | Sequential Process | After make-or-buy decides what to buy, source selection analysis determines which seller to select |
| Contract Types | Tailoring Decision | Fixed-price contracts for cost certainty; T&M contracts for flexibility when risk is higher |
| Lessons Learned | Organizational Process Asset | Knowledge gained from make-or-buy decisions is captured and integrated into lessons learned repository for future projects |
| Risk Management | Input Consideration | When risk and/or uncertainty are greater for the project, quality should be a key element when compared to cost in seller selection |
Quick Review Questions
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A project manager is deciding whether to develop a custom component internally or purchase it from an external vendor. What analysis should be performed first?
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During market research, procurement teams may leverage information gained from conferences and online reviews. What is the primary purpose of this data-gathering technique?
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A project requires a component that can only be manufactured by one supplier due to patent restrictions. What type of procurement method should be used?
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When risk and uncertainty are high for a project, which factor should be emphasized in the seller-selection process: quality or cost?
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A make-or-buy analysis results in a decision to purchase from outside. What is the next step in the procurement process?
PMBOK v8 Reference
Section 3.5 - Procurement Management (pages 245-254, specifically pages 246-247 on make-or-buy analysis) Section 3.5.1 - Planning Procurement (pages 124-125, 246) Section 3.5.2 - Procurement Strategy (pages 66, 247-248)