Build it or buy it? The origins of Yammer

Build it or buy it?  It’s a perennial question for many IT directors. The prevailing logic usually dictates buying to automate a business process, and building for core processes that differentiate your company or product. Here at Highfive, we’re building a product that we think IT leaders shouldn’t have to. In this series, we explore what tools other companies have built internally, or what they chose to buy, and why.

A profitable pivot

When David Sacks moved on from his role as COO at PayPal, he spent a few years as a Hollywood producer, then looked to start his next company. He created Geni.com, a genealogy website that helps families build out their family trees. While building Geni.com, Sacks and his team discovered they needed a better way to communicate internally – to share product ideas, communicate deadlines and monitor progress.

Sacks and co-founder Adam Pisoni set to work building an internal tool to address this need and subsequently spun it off into a separate company called Yammer, founded in 2008. Geni went on to a successful acquisition in 2012, while Yammer snowballed into one of the fastest growing enterprise SaaS companies in history, with over five million users in four years. In 2012, Microsoft acquired Yammer for $1.2 billion.

The decision to build instead of buy was pivotal for Sacks in that it ended up defining a new company altogether. Here are a few lessons we can take away from Yammer’s success that can help when faced with the question, build it or buy it?

1. Start with the user in mind.

Sacks said in numerous interviews that his goal was simple: to spin Yammer out as a separate company so others could use it too. Indeed, it was the basis for their product’s design, says Sacks: “We [had] all worked at multiple companies and [understood] the needs of companies to share information within a private network. We had the luxury of building the solution that we wanted to use ourselves.”

2. Solve a unique problem with a unique solution.

Sacks realized that there was a need, and it wasn’t met by anything out there: “We were looking for a tool to keep our company connected. Something like an enterprise version of Twitter would have been ideal, but it didn’t exist. So we built our own.”

3. Look for a spark.

Sometimes a product prompts a “spark”, or an emotional response. George Zachary, partner at Charles River Ventures and early investor in Twitter and Yammer, said of his advice to Sacks: “Ever since [Twitter] I’ve been looking for these sparks–where there’s pressure to develop sometimes, developing on the side becomes bigger than the original goal… Look at the experience of excitement people get from Facebook and Twitter. It makes people feel connected. People want to feel that way. That emotion is a huge part of this.” If your product not only solves a practical problem, but also does it in an emotionally resonant way – like Yammer, or Apple, or Tesla – there may be a larger appetite for it.

Not every internal company tool will eventually reach millions of users and market under Microsoft’s logo. But, as Yammer demonstrated, if the problem is big enough, unique enough, and unsolved enough, it could be worth solving not only internally, but the world over.

Has your company sprung from a decision to build an internal tool? Tell us more on Twitter @HighfiveHQ.