Buy vs build decisions are rarely black and white. Total cost of ownership calculations reveal surprises on both sides. The framework below removes emotion and focuses on measurable tradeoffs.
TCO of SaaS
Subscription fees plus seat costs plus integration time plus vendor risk. A $50/seat/month tool for 50 users is $30k/year before SSO, SCIM, and custom workflow integration. Vendor lock-in and data portability add future exit costs. Multi-year contracts hide price increases.
TCO of Custom
Build time plus maintenance plus ownership. A six-month custom build at $200k may look expensive until you factor in five years of SaaS fees at $80k/year plus integration overhead. Custom gives full control and IP ownership but requires ongoing engineering capacity.
When Custom Always Wins
Core intellectual property, unique workflow that no SaaS supports, or regulatory requirements that force on-prem or air-gapped deployment. If the software is how you differentiate, build it.
When Custom Always Loses
Commoditized functions (email, CRM, basic accounting), fast speed-to-market required, or team lacks domain expertise. Buying lets you focus engineering on the actual product.
Real Examples
A logistics company spent $400k building a custom TMS only to discover off-the-shelf options covered 90% of needs at $60k/year. A fintech built custom KYC because no vendor supported their exact regulatory workflow — the build paid for itself in 18 months via differentiated product.
Internal links: see microservices vs monolith decision and logistics software custom build.
FAQ
How do we calculate the break-even point?
Sum five-year SaaS TCO versus five-year custom TCO including maintenance (typically 15-20% of build cost per year). Include opportunity cost of delayed features.
What if the SaaS vendor raises prices?
Negotiate caps in the contract or maintain an exit plan. Price risk is real and often underestimated.
Can we start with SaaS and migrate to custom later?
Yes, but data migration and workflow re-implementation costs are high. Plan for this from day one if custom is the long-term goal.
How do we evaluate "unique workflow" claims?
Map every step of the current process. If 80%+ matches an existing SaaS with configuration, buy. If more than 20% requires custom logic, consider building.
What about open source alternatives?
Open source reduces license cost but shifts maintenance burden to your team. Factor in support, security patching, and upgrade effort.
Have a project that needs this? Talk to Rutagon or call 907-841-8407.
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