Custom Software vs SaaS: When Should You Build Instead of Buy?

For commodity software like email and accounting, buying is almost always right. For the software at the centre of how your business runs, it often isn't. Guess wrong and you either pay years of subscriptions and workarounds, or pay to build something you could have rented.

This guide sets out how we think about the decision, including a five-year cost comparison for both approaches.

The True Cost of SaaS

SaaS looks cheaper at the start. You pay a monthly fee and start using it the same day. The long-term costs are where businesses get surprised.

Direct Costs

Most SaaS products charge per user per month. A tool at $50 per user per month seems reasonable until you have 100 users and the bill is $60,000 a year.

The features you need are often in a higher tier, so that $50 product might cost $150 per user once it does what you need. Integrations, API access, advanced features and better support levels often cost extra on top.

Hidden Costs

When SaaS doesn't fit your workflow, staff build workarounds: spreadsheets, manual steps and duplicate data entry that eat hours every week. Training takes longer too, because you're teaching people a process that doesn't match how the business works.

Your data also lives in someone else's system. Getting it out for reporting, migration or compliance can be slow or expensive. And the more a SaaS product is wired into your business, the harder it is to leave, even when a better option comes along.

5-Year TCO Example

This is an illustrative scenario, not a quote: project management software for a 50-person team.

Assumes 10% annual SaaS price increases (rounded to the nearest thousand) and maintenance at 15% of the build cost each year.

At this team size, the custom build comes out around $55,000 cheaper over five years and does exactly what the team needs. With 10 users instead of 50, the SaaS column shrinks to a fifth and buying wins easily.

When SaaS Makes Sense

Commodity Functions

If the software solves a generic problem with standard requirements, SaaS is usually the right choice:

• Email (Gmail, Outlook)
• Video conferencing (Zoom, Teams)
• Document collaboration (Google Docs, Notion)
• Basic accounting (Xero, QuickBooks)
• CRM for small teams (HubSpot free tier)

Early Stage or Uncertain Requirements

When you're still working out what you need, SaaS lets you experiment without a big commitment. Once your requirements settle, look at the build vs buy decision again.

Rapid Deployment Needed

If you need software running this week rather than in three months, SaaS is the only option. Sometimes speed matters more than fit.

Limited Technical Resources

If you have no technical staff and no budget for ongoing maintenance, SaaS hands that whole job to the vendor.

When Custom Software Makes Sense

Competitive Advantage

If the software is part of what makes your business different, building it keeps that difference yours. A SaaS product gives you the same process as every competitor who buys it.

Complex Integrations

When you need to connect several systems in ways the SaaS products don't support, custom software can move data between them without anyone re-keying it.

Unique Workflows

If you've spent years refining how you work, forcing that into generic software usually means giving some of it up. Custom software is built around your process instead. The TG Linen portal is an example: customers order linen online, staff action the orders, and delivered orders become Xero invoices automatically, which saves TG Linen more than 10 hours of manual work a week.

Scale Economics

Custom software gets cheaper per user as you add users, while SaaS gets more expensive. Where the lines cross depends on the product and the build. As a rough guide, it's often somewhere between 30 and 50 users.

Regulatory or Security Requirements

Industries with strict compliance rules (finance, healthcare, government) often need control over data and infrastructure that SaaS can't give them.

Long-Term Vision

If you plan to run the software for five years or more, the economics lean towards building. You own the asset instead of renting it forever.

Decision Framework

Work through these six questions. If most of your answers land in the right-hand column, building is worth a serious look.

Hybrid Approaches

You don't have to choose one or the other.

• SaaS with custom integrations. Use good SaaS products for commodity functions, and build custom automation to connect them and handle the workflows they don't cover.
• Custom core, SaaS periphery. Build the software that's central to your business and buy everything else.
• Custom front end, SaaS back end. Build an interface designed around your users, running on SaaS infrastructure such as Stripe for payments.
• Low-code for simple tools. Use platforms like Retool or Bubble for simple internal tools, and custom development for the complex parts.

Three Hypothetical Examples

These are illustrative composites to show how the decision plays out, not specific clients.

Company A: Chose SaaS (Wrong)

A logistics company adopted a popular project management SaaS. Within 18 months:

• 40% of the features were unused
• Critical workflows needed manual spreadsheet steps
• The monthly cost had grown from $3,000 to $8,000
• Staff spent 5 hours a week on workarounds

They eventually built custom software anyway, so they paid twice.

Company B: Chose Custom (Right)

A professional services firm built custom resource management software. After three years:

• It saves 15 hours a week of admin time
• It connects directly to their CRM and accounting software
• Their client proposals go out faster than competitors'
• Total cost so far is $180,000, including maintenance

The time saving alone doesn't pay for that. At a loaded staff cost of around $55 an hour, 15 hours a week over 48 working weeks is worth about $40,000 a year, so recovering $180,000 on time savings takes four and a half years. The firm built it because the CRM connection and faster proposals win them work, and that is where most of the return comes from.

Company C: Chose SaaS (Right)

A startup used off-the-shelf tools for everything while it tested its business model:

• Slack for communication
• Notion for documentation
• HubSpot for CRM
• Xero for accounting

Once it reached 40 employees with settled processes, it built custom tools for the few operations that were specific to its business.

Making the Transition

If you decide to build, here's how to move off SaaS:

1. Document current workflows. How do you actually use the SaaS today?
2. Identify pain points. What doesn't work well?
3. Prioritise features. What's essential, and what's nice to have?
4. Plan data migration. How will you move existing data across?
5. Build in phases. Don't try to replace everything at once.
6. Run in parallel. Keep the SaaS running until the new system has proven itself.

Whichever way you go, check the decision again each year. Your user count, prices and processes all change.

If you're weighing up a build against a subscription, talk to us. We'll run the five-year numbers with you, and if SaaS is the cheaper answer we'll say so.