Custom Software vs SaaS: A Decision Framework for Growing Companies

Every growing company faces this question: should we build custom software or buy SaaS? The answer isn't always obvious. This framework helps you make the right decision for your business.

The Decision Framework

Evaluate these five dimensions to determine the best path forward:

1. Core Business Differentiation

Build custom if:

• The software directly creates competitive advantage
• Your workflow is unique to your industry/business
• Proprietary algorithms or logic provide value

Buy SaaS if:

• The functionality is commodity (email, file storage, CRM)
• Industry-standard processes work for your needs
• Speed to market matters more than customization

2. Total Cost of Ownership (TCO)

SaaS costs (ongoing):

• Monthly subscription fees (usually per-user)
• Add-on features and integrations
• Training and onboarding
• Vendor lock-in and switching costs

Custom software costs:

• Initial development ($50k - $500k+)
• Ongoing maintenance (15-20% of dev cost annually)
• Hosting and infrastructure
• Internal engineering support

3. Data Control and Security

Build custom for:

• Highly sensitive data (healthcare, finance)
• Regulatory compliance requirements
• Complete control over data storage location
• Custom security requirements

SaaS works when:

• Provider has strong compliance certifications
• Data sensitivity is low to moderate
• Standard security measures suffice

4. Integration Requirements

Custom software excels at:

• Complex, multi-system integrations
• Legacy system compatibility
• Real-time data synchronization
• Proprietary protocols or APIs

SaaS is better when:

• Provider offers pre-built integrations
• Standard APIs work for your needs
• Zapier/Make.com automation suffices

5. Scalability and Flexibility

Build custom when:

• Requirements will evolve significantly
• You need features competitors don't offer
• Business model requires unique workflows
• You're scaling beyond SaaS tier limits

Use SaaS when:

• Needs are well-defined and stable
• Provider's roadmap aligns with your growth
• Scaling up/down is predictable

The Hybrid Approach

Often, the best solution combines both:

• Core platform: Custom (your competitive moat)
• Email & communication: SaaS (Gmail, Slack)
• CRM & sales: SaaS (HubSpot, Salesforce)
• Analytics & BI: SaaS (Metabase, Looker)
• Infrastructure: Custom deployment on AWS/GCP

Case Study: E-commerce Platform

Scenario: Growing e-commerce company with unique fulfillment workflow.

SaaS approach: Shopify ($299/mo) + apps ($300/mo)

• ✅ Fast setup (weeks)
• ✅ Low upfront cost
• ❌ Limited customization
• ❌ Transaction fees (2%)
• ❌ Can't modify core checkout flow

Custom approach: Next.js + Stripe + custom fulfillment

• ✅ Full control over UX and workflow
• ✅ No transaction fees
• ✅ Custom fulfillment integration
• ❌ Higher upfront cost ($150k)
• ❌ Longer development (3-4 months)

Break-even analysis:

• SaaS: $600/mo + 2% transaction fees = $6,000/mo at $300k revenue
• Custom: $150k upfront + $2,000/mo maintenance
• Break-even: ~2.5 years

Decision: Build custom—the fulfillment workflow is their competitive advantage, and they're already at $400k/mo revenue.

Common Mistakes

Over-customizing Commodity Functions

Don't build custom CRM, email, or project management unless you have very specific needs. Use proven SaaS tools.

Under-estimating Maintenance

Custom software requires ongoing maintenance. Budget 15-20% of development cost annually.

Ignoring Integration Complexity

Integrating multiple SaaS tools can become expensive and fragile. Sometimes a unified custom platform is simpler.

Choosing SaaS for Core Differentiators

If your competitive advantage depends on unique workflows, don't settle for generic SaaS solutions.

Decision Tree

Is this core to your business differentiation?
├─ Yes → Build custom
│  └─ Exception: Proven SaaS with extensive customization API
└─ No → Use SaaS
   └─ Exception: Existing SaaS too expensive at scale

Does the software handle highly sensitive data?
├─ Yes → Build custom (or use specialized, compliant SaaS)
└─ No → SaaS is fine

Do you need unique workflows not offered by any SaaS?
├─ Yes → Build custom
└─ No → Use SaaS

Will you scale beyond typical SaaS limits?
├─ Yes (>10k users, >$1M/mo) → Build custom
└─ No → SaaS is fine

Is speed to market critical (< 3 months)?
├─ Yes → Start with SaaS, plan custom migration
└─ No → Build custom if other factors support it

When to Start with SaaS and Migrate Later

Sometimes the best strategy is:

1. Launch quickly with SaaS to validate product-market fit
2. Identify pain points and customization needs
3. Build custom replacement incrementally
4. Migrate users gradually with zero downtime

Get Expert Guidance

At Aivoma, we help companies make build-vs-buy decisions based on:

• Business goals and growth trajectory
• Technical requirements and constraints
• Total cost of ownership analysis
• Risk assessment and mitigation

Not sure whether to build or buy for your next project? Our Build, Integration & Migration Kits cover business case modeling, proof-of-concept builds, and hybrid roadmaps that combine SaaS + custom software.

Schedule a consultation and we'll analyze your specific situation.