Why Building Your Own Customer Data Platform (CDP) May Not Be Wise

In today’s fast-paced digital landscape, understanding and utilizing customer data is crucial for businesses. A Customer Data Platform (CDP) plays a pivotal role in achieving this, by unifying customer data from multiple sources to provide a comprehensive view of the customer journey. While the temptation to build a custom CDP might exist, particularly for companies with strong technical teams, this approach is often fraught with challenges. Instead, leveraging open-source CDP solutions can often be a more effective strategy. Here are three compelling reasons why building your own CDP might not be the best decision:

1. Diversion from Core Business Focus

When companies seek a CDP, they are generally looking to solve specific problems: a lack of comprehensive customer understanding, a need for personalized customer journeys, and a desire to utilize customer data for better engagement. Building a custom CDP, however, is analogous to starting a bus company for a single trip to visit your parents – it’s a massive investment in an area that is not your core business.

Time and Effort Misallocation

Developing a CDP requires a significant investment of time and resources, which could be better spent on your primary business activities. The development process involves solving numerous challenges unrelated to your core goals, which can divert attention and resources away from customer activation and engagement strategies.

2. Financial Implications

The cost of developing a high-quality CDP is often underestimated. Initial perceptions may suggest that creating a CDP is not excessively expensive or time-consuming. However, the reality is quite different.

High Development Costs

Developing a functional CDP can cost anywhere from $300,000 to $1 million in programming fees alone. Stopping at the lower end of this budget range often results in a product that doesn’t fully meet your needs. In contrast, commercial fees for open-source solutions, which offer customization and extendibility, are significantly more economical. For instance, running a commercial open-source system like Tracardi for 25 to 50 years could be much more cost-effective than building a custom solution.

3. Technical Challenges

On the surface, coding a CDP might seem straightforward, but the reality is far more complex.

Scalability and Robustness

A CDP quickly becomes central to a business, particularly in the era of big data and AI. It needs to handle potentially billions of events annually, even for small businesses. Creating a system capable of this scalability is a monumental task. Established CDP vendors have already navigated these challenges, ensuring their solutions are robust and reliable.

Technical Complexities

  • Distributed Systems: Handling vast amounts of customer data from diverse sources like web pages, databases, and mobile apps requires a sophisticated distributed system.
  • Profile Merging: This involves challenges like handling locks, resolving merge errors, managing inconsistencies, and dealing with latency and out-of-order profile stitching.
  • Maintenance and Data Integrity: An error in a custom-built CDP can lead to corrupted customer data, posing a significant risk to business operations.

Comparison with Open-Source Solutions

Reasonably priced open-source CDPs offer customization without the burden of excessive data collection costs. They are significantly cheaper than SaaS solutions that charge per data point collected. Furthermore, they prevent vendor lock-in, allowing businesses to adapt and extend the system as they grow.

Conclusion

In essence, developing a custom CDP diverts valuable resources from a company’s core business, incurs significant financial and time costs, and presents complex technical challenges. Open-source solutions offer a more viable, cost-effective, and lower-risk alternative, allowing businesses to leverage the power of a CDP without the pitfalls of developing one in-house. The focus should remain on utilizing a CDP to enhance customer understanding and engagement, rather than getting entangled in the intricacies of building and maintaining one.

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