Build vs Buy AI Chatbots – 6 Point Decision Framework

Dharini

Oct 3, 2024

21 min read

1. Time Required to Build vs Buy a Chatbot

Time required to Build a Chatbot from scratch:

Building a chatbot from scratch demands significant time and effort as it is a complex and resource-intensive process. It involves multiple phases, which is important as each phase ensures the chatbot being built is effective and perfectly aligned with the business goals. Let’s break down the development cycle in detail:

Planning and Design:

This phase lays the foundation for the chatbot’s functionality and user experience. It involves identifying the chatbot’s primary objectives. In this phase, businesses must define user personas to understand the target audience’s needs and expectations.
It also includes designing interaction flows( the step-by-step paths users will take when interacting with the chatbot). This ensures that the chatbot provides relevant and accurate responses while guiding users through various scenarios seamlessly.

Development:

Product teams begin building the chatbot by coding and developing the underlying architecture. This involves creating conversational flows that dictate how the chatbot will respond to different user inputs. Developers integrate complex AI algorithms, to enable the chatbot to understand and interpret human language and respond accordingly increasing customer satisfaction.
The development stage is where the chatbot’s core functionalities are established, including its ability to handle diverse and multilingual queries, escalate complex issues to human agents, and integrate with existing business systems like CRM and helpdesk software. Each of these elements requires careful coding and configuration to ensure smooth and efficient operation.

Training the AI:

This phase requires continuous testing and refinement to reduce errors and improve the chatbot’s ability to understand context, detect intent, and provide appropriate responses.
The chatbot learns to understand and respond accurately to user inputs. This is achieved by feeding the AI large datasets containing various queries and responses. The training data should be comprehensive, covering many potential user questions and scenarios.
The AI model is fine-tuned through multiple iterations to enhance its accuracy and ensure it can handle complex conversations making it humanized.

Testing:

Testing is an iterative process, feedback from each round is used to make necessary adjustments and improvements before deployment. It is done by rigorous testing to evaluate the chatbot’s performance and functionality. This phase includes several types of testing:
The Functional Testing verifies that the chatbot’s features work accurately ( making sure all the predefined scenarios and use cases are handled correctly ).
User Acceptance Testing is where real users interact with the chatbot to identify complex issues and provide feedback on the chatbot’s responses.
In the Load Testing the chatbot’s ability to handle a high volume of user interactions simultaneously without performance degradation is carefully tested.

Deployment and Iteration:

Deploying the chatbot involves moving it from the development environment into a live production setting where real users can interact. After successfully deploying the chatbot we will have to continuously monitor to track the chatbot’s performance and user interactions to identify areas for improvement.
The iteration phase starts once we deploy and it is a never-ending process, where necessary updates and modifications are made based on user feedback and business needs ensuring that the chatbot remains effective and relevant over time, adapting to changes in user behavior and industry trends.

Time required to Buy a pre-built Chatbot:

Opting to buy a chatbot can drastically reduce the time and effort required to implement an effective solution. Here’s a detailed look at the benefits of buying a chatbot:

Quick Deployment:

Pre-built chatbots come with already-developed foundational functions, enabling businesses to deploy them rapidly. Depending on the complexity of your needs and the level of customization required, a pre-built chatbot can be up and running within days or weeks, rather than months.
This quick deployment allows businesses to start leveraging chatbot benefits almost immediately, improving customer service efficiency and responsiveness. It’s an ideal choice for companies looking to implement AI-driven support solutions without the extended timeline associated with building one from scratch.

Customization Phase:

Although buying a chatbot is ready for immediate use, it still needs to be customized as per your specific requirements. The customization phase involves configuring the chatbot’s responses, integrating them with existing systems ( CRMs or helpdesk software), and using a tone and language to match the brand voice.
The customization phase is relatively short compared to building a chatbot, as it builds on a pre-existing framework. It allows businesses to tailor the chatbot to handle industry-specific queries or provide specialized support while avoiding the lengthy development process of building a chatbot from scratch.

Time Efficiency:

When you buy a chatbot, it is ready to deploy in about 2 – 4 weeks( depending on customization needs), significantly reducing the time to market. This saves time by enabling businesses to quickly start addressing customer needs and improving the customer satisfaction score ( CSAT Scores).

While buying a chatbot offers rapid deployment and reduced time to market, extensive customization needs or highly specific business requirements may still necessitate additional development efforts( might increase the time to market by 1 or 2 weeks ). Businesses must also be careful while buying a chatbot and buy a chatbot that delivers what they promise.

2. Cost Required to Build vs Buy a Chatbot

The cost required to Build a Chatbot from Scratch:

Building a chatbot internally involves a considerable financial commitment, considering the costs associated with building, deploying, and maintaining the bot over time businesses that lack in-house AI expertise need to allocate additional resources for development. Let’s break down the key cost components involved in building a chatbot:

Initial Development Costs:

Building a chatbot from scratch requires significant upfront investment in terms of the salaries of employees( developers and designers ) and the tech stack required by the engineering team. The Salaries for Hiring Skilled Developers can range anywhere from $1,000/month to $15,000/month + Minimum Long-term Investment of $25,000.

Operational Expenses:

Maintenance costs include bug fixes, performance improvements, and scaling the chatbot as user demand grows. Regular updates are crucial as it ensure the chatbot’s content and functions remain up-to-date, requiring extra development and testing efforts. These ongoing costs can range from $10,000 to $20,000 annually, depending on the chatbot’s complexity and the scale of operations.

Long-term Investment:

Building a chatbot requires continuous investment to remain relevant and effective over time( upgrading its capabilities, incorporating new AI advancements, and ensuring it adapts to changing customer expectations ).
Businesses must consider the cost of hiring new talents and training them. Involving a minimum investment of $10,000 – $25,000 annually to ensure the chatbot gives a return on investment.

Building a chatbot in-house can provide significant long-term value for businesses with financial resources and technical expertise. However, the high initial and ongoing costs can be a significant barrier for smaller organizations or those with limited budgets. For companies that cannot afford these investments, alternative solutions such as pre-built chatbots may be more practical.

The cost required to Buy a Pre-Built Chatbot:

Purchasing a pre-built chatbot is often a more cost-effective solution for businesses, especially those looking to implement a chatbot quickly without the high costs associated with building a chatbot in-house. Here are the primary financial considerations:

Lower Initial Costs:

Buying a chatbot requires a lower upfront investment compared to building a chatbot from scratch. Vendors often offer subscription-based pricing enabling businesses to buy a chatbot that fits within their budget.

Predictable Costs:

One of the significant advantages of buying a chatbot is the predictability of costs. With a monthly retainer or annual fees, businesses can easily plan their budget.
These fees often cover essential services such as hosting, basic customization, and ongoing support from the vendor. This simplifies financial planning and reduces the risk of unexpected costs that could arise when building and maintaining a chatbot internally.

While buying a chatbot the decision should be based on a thorough evaluation of both the short-term and long-term financial implications. Subscription fees, add-on features, and potential costs for extensive customization can add up. Businesses should assess whether the initial cost savings align with their long-term goals, particularly if future scalability or specialized functionality is required.

3. Expertise Required to Build vs Buy a Chatbot

Expertise Required to Build a Chatbot from Scratch:

Building a chatbot in-house requires expertise in specialized fields such as Artificial Intelligence (AI), Machine Learning (ML), and Natural Language Processing (NLP). It also comes with several important considerations:

Customization Potential:

Developing a chatbot internally offers the freedom to design features and customization that are perfectly aligned with your unique business processes and objectives. This customization can extend to various aspects, such as incorporating specific conversation flows, creating personalized user experiences, and integrating the bot with proprietary systems and databases.
An in-house development approach enables businesses to build a chatbot that not only meets functional requirements but also uses a tone and language to match the brand voice. This can enhance user engagement and brand loyalty, as customers interact with a bot that feels like a human.

Technical Challenges:

Building a chatbot requires overcoming various technical challenges. Developers must design and implement sophisticated algorithms to enable the bot to understand and generate human-like responses, handle complex queries, and manage contextual conversations. The chatbot must integrate smoothly with existing business systems. Achieving seamless integration while safeguarding data security and ensuring compliance is a complex task that demands high-level technical expertise and careful planning.

Continuous Learning:

To ensure the chatbot remains effective and competitive, the in-house team must stay updated on these advancements. Regular updates are needed to incorporate improvements in AI, such as better language models or advanced sentiment analysis. This continuous improvement process requires a proactive approach to learning and skill development, which can be resource-intensive but is crucial for keeping the chatbot relevant and performing well over time.

Building a chatbot in-house is ideal for businesses with the technical expertise and resources to develop a highly customized solution. However, the investment required in terms of skills, resources, and time can be significant, making this approach less feasible for companies without these capabilities.

Expertise Required to Buy a Pre-Built Chatbot:

Purchasing a chatbot from a reputable vendor offers a practical alternative for businesses that lack the in-house technical expertise to build one from the ground up. This approach leverages the vendor’s specialized knowledge, providing a reliable solution with minimal development effort. Key benefits and considerations include:

Proven Solutions:

Pre-built chatbots are developed based on extensive research, testing, and refinement, ensuring that they deliver consistent and reliable performance. These bots have been optimized to handle a wide range of user interactions without requiring extensive customization.
Vendors typically use established frameworks and best practices in AI and ML to develop their chatbots reducing the time and effort needed to get the chatbot up and running.

Specialized Knowledge:

Chatbot vendors often have expertise in various AI domains, including NLP, conversational design, and user experience optimization. They provide high-quality solutions that incorporate the latest advancements in these fields, helping businesses implement a chatbot that meets modern standards for functionality and increased user satisfaction.
Vendors can offer valuable guidance during the implementation phase, helping businesses configure and optimize the chatbot to meet their specific needs. This support extends beyond initial deployment, with vendors often providing ongoing maintenance and updates to ensure the chatbot remains effective and up-to-date.

For businesses without the technical expertise to build a chatbot internally, purchasing one from a reputable vendor is a practical and effective solution. It offers a quick path to deployment and reliable performance, backed by the vendor’s specialized knowledge and support. However, businesses should carefully assess their long-term needs and the chatbot’s flexibility to ensure it can grow and adapt alongside their operations.

Understanding Maintenance Responsibilities: Build vs. Buy a Chatbot

Maintenance Responsibilities for Building a Chatbot from Scratch

Maintaining an in-house chatbot grants businesses full control over its updates, features, and performance, but it also requires a continuous investment of time, effort, and resources. This approach offers flexibility and customization but comes with several key challenges:

Periodic Updates:

With an in-house chatbot, businesses can prioritize updates based on their specific operational needs and objectives. This means they can focus on adding new features, improving user experiences, or refining existing functionalities in line with their strategic goals. For example, a company might choose to enhance the chatbot’s language processing capabilities to better handle complex queries or integrate it with new systems as business processes evolve.
As the business landscape changes, the ability to quickly implement necessary updates ensures the chatbot remains relevant and effective. This could involve adapting the chatbot to new industry regulations, incorporating feedback from user interactions, or optimizing performance based on emerging technological trends.

Operational Burden:

Maintaining a chatbot requires a dedicated team focused on its ongoing support, which includes monitoring performance, resolving issues, and implementing updates. This operational responsibility can place a heavy burden on resources, particularly for smaller organizations that may lack specialized personnel for these tasks.
The technical nature of chatbot maintenance—such as updating machine learning models, refining natural language understanding (NLU) components, and integrating new features—demands specialized skills. This can result in a heavy workload for the development team, potentially diverting focus from other critical business projects.

Building a chatbot offers businesses the ability to tailor its maintenance and development precisely to their needs, providing maximum control over its functionality and evolution. However, the ongoing resource demands and associated costs can pose a significant challenge, particularly for smaller organizations that may not have the necessary technical capabilities or financial resources to support this level of commitment.

Maintenance Responsibilities for Buying a Pre-Built Chatbot:

Buying a chatbot from a vendor shifts the responsibility of maintenance to the service provider, offering a convenient solution that reduces internal technical demands. While this approach can simplify operations, it also introduces certain dependencies that must be considered:

Vendor Updates:

Vendors generally manage all updates to keep the chatbot current and operational. This encompasses applying security patches, upgrading the underlying AI models, and introducing new features as they become available. This automated maintenance process helps avoid service interruptions and ensures the chatbot continues to perform optimally without requiring active involvement from the business.
By leveraging the vendor’s expertise and resources, businesses can expect consistent, high-quality performance. This is especially beneficial for companies that lack the in-house technical skills necessary to oversee complex chatbot systems or prefer to concentrate their efforts on core business activities rather than IT maintenance.

Ongoing Support:

Vendors offer ongoing support for troubleshooting, optimization, and customization, ensuring that any issues are resolved quickly and effectively.
Beyond technical assistance, vendors frequently provide training sessions or resources to help businesses understand how to use the chatbot effectively. This is particularly advantageous during the initial deployment phase, as it ensures that the business can fully leverage the chatbot’s capabilities from the outset.

Dependence on Vendor:

While purchasing a chatbot minimizes internal technical efforts, it also means the business is dependent on the vendor for timely updates, support, and troubleshooting. Any delays or lapses in service quality from the vendor can directly impact the chatbot’s performance and, consequently, the customer experience.
The extent of customization and updates available may be constrained by the vendor’s service offerings. For businesses with highly specific or evolving needs, this lack of direct control can be a limitation, potentially requiring additional investment in custom development or integration work to achieve the desired functionality.

Buying a chatbot is ideal for businesses looking to reduce internal technical burdens and benefit from the expertise and resources of a specialized vendor. However, the trade-off is a reliance on the vendor’s support and service quality, which can influence the chatbot’s overall effectiveness and adaptability to changing business requirements.

5. Integration Requirements for Building vs Buying a Chatbot

Integration Requirements for Building a Chatbot

Building chatbots offers the advantage of deep and seamless integration with your existing systems and infrastructure, making them an ideal solution for businesses that require a high level of customization. However, this approach also introduces complexities that demand significant planning, expertise, and ongoing commitment. Key aspects include:

Seamless Integration:

Building a chatbot can be designed to integrate smoothly with your company’s specific systems, workflows, and databases, minimizing compatibility issues. This allows for a high degree of synchronization between the chatbot and other software tools used within the organization.
Deep integration ensures that the chatbot can interact with other business tools in real-time, providing users with seamless experiences. For example, it can automatically pull information from customer databases, process orders, or schedule appointments without manual intervention. This increases operational efficiency and improves the overall user experience.

Building a chatbot in-house is a great option for businesses that need a solution specifically tailored to their unique systems and workflows. It allows for deep integration and customization, ensuring that the chatbot can operate efficiently within the existing infrastructure. However, the complexities involved, particularly with regard to ongoing maintenance and potential security risks, mean that businesses without dedicated technical expertise may face significant challenges in sustaining the chatbot’s long-term success.

Integration Requirements for Buying a Pre-Built Chatbot:

Purchasing a pre-built chatbot offers a fast and convenient way to implement AI-driven customer interactions with minimal technical effort. However, while pre-built chatbots come with many advantages, they may also have limitations when it comes to integrating with custom or niche systems. Key points to consider include:

Pre-Built Connectors:

Many pre-built chatbots come with ready-made connectors for popular platforms like Zendesk, Freshdesk, Jira, Intercom, etc. making integration with these systems simple and quick. For businesses using widely adopted software, pre-built chatbots can significantly reduce the time and effort needed for setup.
However, if your business relies on niche or custom-built systems, these pre-built chatbots might not provide the same level of flexibility or compatibility. In such cases, additional development or customization may be necessary to ensure smooth integration.

For businesses with standard systems and workflows, buying a chatbot offers a convenient, fast, and cost-effective solution. The vendor handles most of the technical challenges, including integration, maintenance, and updates, making it an ideal choice for companies with limited in-house technical expertise.

6. Security and Compliance Measures for Building vs Buying a Chatbot

Security and Compliance Measures for Building a Chatbot from Scratch:

Building a chatbot in-house allows businesses to have greater control over security and compliance. This can be particularly important for organizations in highly regulated industries or those handling sensitive customer information.

Tailored Security Protocols:

By building a chatbot in-house, businesses can implement Custom Security Measures that are designed to meet their business requirements, making it complex for businesses to ensure compliance with all necessary regulations including adhering to data protection laws such as GDPR, CCPA, or HIPAA, which may require constant monitoring, updates, and auditing to maintain compliance.
Building an in-house chatbot allows businesses to customize the solution to meet specific industry standards. A healthcare company could design its chatbot to comply with HIPAA regulations, ensuring patient information is handled securely, while a financial institution could build in protections to meet financial regulations like PCI, DSS, or SOX.
The in-house team must understand the industry’s regulatory environment and keep up with changing compliance standards. Businesses must stay current with legal updates, as failing to do so could lead to hefty penalties or security vulnerabilities.

LLM Complexity:

If the chatbot is powered by Large Language Models (LLMs), managing their security introduces additional complexities. LLMs have unique vulnerabilities, such as data leakage or unintended generation of harmful content. Businesses must implement specific safeguards to manage these risks, which can be challenging without expert knowledge of AI security.
Protecting LLMs requires advanced security measures such as secure model training, differential privacy, and robust access controls. These complexities add to the overall effort needed to maintain a secure in-house chatbot.

For businesses, particularly in regulated industries where adherence to specific standards is essential, building a chatbot in-house is a suitable option. However, the resource demands to maintain these levels of security and compliance can be significant, especially when dealing with advanced AI technologies like LLMs. Businesses must carefully weigh the benefits of control against the costs and complexities involved.

Security and Compliance Measures for Buying a Pre-Built Chatbot:

Buying a pre-built chatbot from a reputable vendor offers a more convenient solution when it comes to security and compliance. Vendors typically handle the core security infrastructure, which can reduce the complexity for businesses, especially those without dedicated technical teams. However, it’s important to ensure that the vendor’s security measures align with the specific needs of your organization.

Vendor-Handled Security:

When buying a pre-built chatbot, the vendor manages the core security infrastructure, including encryption, access controls, and incident response mechanisms. This simplifies the security management process for businesses, as they no longer need to worry about maintaining these protocols in-house.
Most vendors provide standardized security features that are applied across all clients, ensuring that common security protocols, such as encryption for data in transit and at rest, are consistently implemented. This can be a major advantage for businesses that want to minimize the complexity of securing their chatbot.

Standardized Security Measures:

Pre-built chatbots often come with security protocols that adhere to widely accepted industry standards, such as ISO 27001, SOC 2, or NIST cybersecurity frameworks. These standardized measures ensure that the chatbot meets basic security requirements, which can be beneficial for businesses that don’t need highly customized security.
Since these security measures are standardized, they are applied uniformly across all customers, ensuring a reliable level of security for each deployment.

Compliance Assurance:

Reputed vendors ensure that their chatbots comply with major regulatory standards, such as GDPR, CCPA, or HIPAA, depending on the industry they serve. This can save businesses significant time and effort, as they can trust that the chatbot complies with the necessary legal requirements.
Many vendors handle updates to maintain compliance with evolving regulations. This ensures that the chatbot remains in line with the latest legal standards, without requiring businesses to continually monitor and implement regulatory changes themselves.

Simplified Management:

Security and compliance updates are handled by the vendor, reducing the burden on your team. This includes updates to address new security vulnerabilities, regulatory changes, or performance enhancements.

Buying a chatbot from a reputable vendor is a smart option for businesses looking to simplify the management of security and compliance. The expertise of the vendor plays a key role in keeping the chatbot secure and compliant. However, it’s essential to thoroughly assess the vendor’s capabilities and past performance.

A detailed comparison between Building a Chatbot in-house vs Buying a Chatbot-

Conclusion

The choice between building or buying a chatbot depends on key factors, each with pros and cons. Building in-house offers customization and control but requires significant time, expertise, and maintenance, making it ideal for businesses with specific needs. Buying a pre-built chatbot allows for quick deployment, predictable costs, and vendor support, suitable for enhancing customer service without the technical burden. The best decision depends on your organization’s needs, resources, and long-term goals. Use the calculator below to evaluate these 6 key parameters and determine the best option for your business.

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