SaaS vs Custom Software: The Decision Guide
Both have their place. The expensive mistake is choosing the wrong one for your situation.
The SaaS vs custom software debate isn't really a debate at all — it's a context-dependent decision that depends on your team size, growth trajectory, regulatory environment, and how central the software is to your competitive advantage.
Most companies should use SaaS for most things. Email, accounting, HR, basic project management — there's no reason to build these yourself. But the software that IS your business, that creates your competitive edge, or that has requirements no SaaS tool can meet? That's where custom development pays for itself.
When SaaS Is the Right Choice
SaaS wins when the software is a commodity — when your requirements are standard and shared by thousands of other companies. There's no competitive advantage in building your own email system, and the SaaS vendor invests far more in security, uptime, and features than you could justify.
SaaS also wins when speed matters more than fit. Need a CRM running by next week? Salesforce or HubSpot will get you there. Need project management for your team? Jira, Linear, or Asana are ready to go. The value is in the immediate availability, not the perfect fit.
Standard Requirements
Your needs are common. Thousands of companies use the tool the same way you would.
Not Core to Your Business
The software supports your operations but isn't your competitive advantage.
Small Team
Under 20 users. Per-seat pricing is manageable and the speed-to-value is worth it.
Rapid Deployment
You need something working this week, not in 8 weeks.
When Custom Software Is the Right Choice
Custom software wins when your requirements are genuinely unique — when no SaaS tool does what you need, or when the workarounds required to make a SaaS tool fit are more expensive than building the right solution.
It also wins at scale. Per-seat SaaS pricing means costs grow linearly with your team. Custom software has a higher upfront cost but much lower marginal cost per user. For a 200-person company, the three-year TCO of custom software is often 50-70% lower than enterprise SaaS.
Unique Workflows
Your processes don't fit any standard tool. You're spending more time on workarounds than work.
Competitive Advantage
The software IS your product or directly enables your competitive edge.
Scale Economics
50+ users. Per-seat pricing makes SaaS more expensive than custom over 2-3 years.
Regulatory Requirements
HIPAA, SOC 2, CCPA — you need full control over data handling and infrastructure.
The Hybrid Approach
Most mature companies use both. They use SaaS for standard operations (email, HR, accounting) and custom software for their core workflows and competitive differentiators. The art is knowing which category each tool falls into.
A common pattern we see: company starts with all SaaS, outgrows the most critical tool (usually CRM, internal tools, or workflow management), rebuilds that one thing as custom software, then gradually replaces other SaaS tools as they outgrow them too.
This phased approach is smart because it lets you prove the model with the highest-pain tool before committing to broader custom development.
The Real Cost Comparison
SaaS costs are predictable but compound: monthly fees × number of users × years of use. A 50-person team on enterprise SaaS tiers easily spends $100K-300K per year on software subscriptions.
Custom software costs are front-loaded: $30K-200K to build, then $5K-20K per year in hosting and maintenance. The break-even point is typically 18-30 months for teams of 30+ users.
But the most important cost comparison isn't just the subscription or build price — it's the opportunity cost. What features aren't you shipping because your SaaS tool can't support them? What customers are you losing because your workflows are constrained by someone else's product decisions?
Frequently Asked Questions
Should a startup build custom software?
What about open-source alternatives to SaaS?
How do I calculate the ROI of custom software?
SaaS or Custom? Let Us Help You Decide.
Book a free consultation. We'll review your current tools, analyze your costs, and give you an honest recommendation — even if that recommendation is to stick with SaaS.