TL;DR
- The true cost of SaaS goes far beyond subscription fees—factor in integrations, workarounds, and opportunity costs
- Custom software isn't always cheaper, but sometimes it's dramatically cheaper
- Break-even typically falls between 12-24 months for mid-sized companies
- A hybrid approach (SaaS for commodities, custom for differentiators) usually wins
- Use the framework below to decide based on your situation, not generic advice
The $112,000 Question
A 75-person operations company was paying $4,200/month for five SaaS tools that didn't talk to each other. Their team spent 8 hours a week moving data between systems—exporting, reformatting, importing, reconciling.
When they calculated the real cost—subscriptions plus labor plus the opportunity cost of skilled employees doing data entry—they were burning $112,000 annually on a workflow that a $45,000 custom system could replace.
They made the switch. Two years later, they'd saved $179,000.
This isn't a story about custom always being better. It's about making the right call for your context. Sometimes SaaS is exactly what you need. Sometimes it's quietly killing your productivity.
The hard part is knowing which situation you're in.
Why This Decision Is So Hard
Most build-vs-buy advice comes from people with skin in the game. SaaS vendors want you subscribing. Agencies want you building. Both present compelling arguments—because both can be right, depending on your situation.
We build custom software. So yes, we have skin in the game too. But here's our promise: we'll tell you when SaaS makes more sense. A client who builds when they shouldn't will eventually blame the builder. And getting this wrong costs you more than our fees ever would.
Here's how to actually make this decision.
The Real Cost of SaaS (It's Not Just the Subscription)
When you look at SaaS pricing, you see the monthly fee. That's the obvious part. But that number represents maybe 40-60% of what you'll actually spend.
The Visible Costs
- Base subscription: The sticker price
- Per-seat fees: $15/user/month adds up fast at scale
- Premium tiers: The features you actually need are always in the expensive plan
- Add-ons: Integrations, storage, analytics
The Hidden Costs
Seat sprawl. You bought 10 licenses. Now you need 25. That "startup" pricing you locked in? Gone. Enterprise rates kick in, and you're paying 3x what you budgeted.
Integration tax. Your CRM doesn't talk to your project management tool. So you need Zapier ($50-500/month), plus someone to fix automations when they break. Or custom API connectors ($5,000-20,000 each).
Workaround labor. Your team exports from System A, reformats in a spreadsheet, imports to System B. Daily. That's 30 minutes per person, 5 people, 250 days a year. At $50/hour: $31,250 annually in pure busywork.
Vendor lock-in. The SaaS you depend on gets acquired. Prices jump 40%. Features get killed. Your data becomes a hostage in a pricing "negotiation."
Opportunity cost. You can't differentiate on commodity tools. If everyone uses the same CRM with the same workflow, where's your edge?
The Formula
True SaaS Cost =
Annual subscriptions
+ Integration costs (Zapier, connectors, maintenance)
+ Workaround labor (hours × rate × 52 weeks)
+ Opportunity cost
For many mid-sized companies, what looks like $30,000/year in SaaS is actually $80,000-150,000 when you count everything.
The Real Cost of Custom Software (It's Not Just the Build)
Custom has its own iceberg of costs. Honesty here prevents ugly surprises.
The Visible Costs
- Initial development: Design, architecture, coding, testing
- Your time: Meetings, feedback, decisions
The Hidden Costs
Ongoing maintenance. Software isn't static. Bugs surface. Security patches hit. Dependencies update. Budget 15-20% of development cost annually.
Hosting and infrastructure. Servers, databases, monitoring. Usually $200-2,000/month depending on scale.
Feature evolution. Your business changes. Your software needs to keep up.
Technical debt. Built poorly, custom compounds problems instead of solving them. Cutting corners on architecture costs 3-5x later.
Team dependency. Lose the developer who built it—what happens? Documentation and maintainability matter.
The Formula
Year 1 Cost = Development + Hosting + Maintenance reserve (15-20%)
Year 2+ Cost = Hosting + Maintenance + Enhancements
The Decision Framework
Stop reading generic advice. Start applying specifics to your situation.
Build Custom When:
1. It creates competitive differentiation. If the software is your product, or enables a workflow competitors can't match, build it. You can't out-innovate on the same off-the-shelf tools everyone else uses.
2. Volume justifies the investment. 50 people using it daily? Efficiency gains compound fast. 3 people monthly? SaaS wins.
3. Your workflow is genuinely unique. "We do things differently" is often an excuse. But sometimes it's real. If your processes don't fit any SaaS—and they drive results—protect them with custom.
4. Deep integration is critical. Real-time data sharing with complex business logic? Zapier won't cut it.
5. You're paying the SaaS tax. $50,000+ annually on overlapping tools that don't integrate? The math often favors consolidation.
6. Data ownership matters. Regulatory, competitive, or strategic reasons might demand your data lives on your infrastructure.
Buy SaaS When:
1. It's not core to your business. Email, chat, video calls, basic project management—unless you're in those industries, buy commodity. Don't reinvent solved problems.
2. Speed matters more than fit. Need a CRM by Monday? Custom takes months. Urgency sometimes decides for you.
3. You lack the expertise to build it right. Security-critical, compliance-heavy, technically complex—sometimes specialists should handle it.
4. Volume is low. 5 people using it twice a week? ROI never materializes.
5. The space evolves fast. AI tools, emerging categories—sometimes you want vendors investing millions in R&D.
6. Cost is genuinely trivial. A $50/month tool that works? Don't overthink it.
The Hybrid Approach (Usually the Best Answer)
Most companies shouldn't be pure SaaS or pure custom. Be strategic about both.
- SaaS for commodities: Communication, file storage, basic productivity
- Custom for differentiated workflows: The processes that create competitive advantage
- Custom middleware for integration: Connect your SaaS tools through a layer with your business logic
Example stack:
- Google Workspace (SaaS) for email and docs
- Slack (SaaS) for communication
- Custom system for core operations
- Custom integration layer connecting everything
Break-Even Analysis: The Math
Let's run real numbers.
Current state:
- SaaS subscriptions: $3,500/month = $42,000/year
- Zapier + maintenance: $400/month = $4,800/year
- Manual reconciliation: 10 hrs/week × $50/hr × 52 = $26,000/year
- Total: $72,800/year
Custom alternative:
- Development: $60,000
- Hosting: $400/month = $4,800/year
- Maintenance: $800/month = $9,600/year
- Year 1: $74,400
- Year 2+: $14,400/year
The math:
- Annual savings after Year 1: $72,800 - $14,400 = $58,400
- Break-even: 12.3 months into Year 2
After 3 years:
- SaaS path: $218,400
- Custom path: $103,200
- Savings: $115,200
Your numbers will differ. But this is the calculation to run. Be honest about every cost.
Red Flags: Signs You're on the Wrong Path
Build Custom If:
- You're paying for 47 features and using 6
- Your team complains about workarounds daily
- SaaS costs jumped 40%+ and you had zero leverage
- You're duct-taping 5+ tools with fragile automations
- The vendor's roadmap doesn't match where you're going
- Someone's full-time job is managing integrations
Stick with SaaS If:
- Your "custom" requirements are actually standard
- You don't have budget for ongoing maintenance
- The problem isn't core to your business
- You need to launch in weeks, not months
- Your team would resist changing tools anyway
Questions to Ask Before Deciding
Usage & Volume
- How many people use this daily?
- If it goes down, what breaks?
Economics
- True annual cost of current approach?
- Custom build + maintain cost?
- Realistic break-even timeline?
Strategic Value
- Does this create competitive differentiation?
- Does using the same SaaS as competitors limit you?
Risk & Control
- What if the vendor raises prices, gets acquired, or shuts down?
- Can you maintain custom internally or with a trusted partner?
Hybrid Options
- Start with SaaS and migrate when math changes?
- Custom for core, SaaS for peripherals?
The Honest Truth
This isn't about always building or always buying. It's about being strategic instead of defaulting to whatever's easiest.
Most mid-sized companies win with hybrid: SaaS for what doesn't differentiate you, custom for what does. The key is knowing which is which—and doing the math honestly.
The worst choice is no choice. Defaulting to SaaS because "everyone does" or building because "we want to own it" are emotional responses, not strategic ones.
Use the framework. Run the numbers. Decide strategically.
Next Steps
Evaluating a build-vs-buy decision and want a second opinion? We're happy to talk. No pitch—just a conversation about what makes sense for you. Sometimes we'll say keep your SaaS. Sometimes we'll say build. Either way, you'll leave with clarity.