5 minute read · Published June 15, 2024

A buy vs. build analysis often points to buying

Latest Update July 15, 2024

Imagine you're the CTO of a rapidly growing e-commerce company. 

Your customer base is expanding, and along with that comes more complexity of managing orders, inventory, and customer relationships. Your current systems are struggling to keep up, leading to delayed orders and frustrated customers. 

You gather your team to discuss a critical decision: should you build a custom software solution tailored to your specific needs, or buy an existing purpose-built software that promises to streamline your operations and enhance customer satisfaction? The future of your business hinges on making the right choice.

This is a decision that almost every team faces as they’re in the process of scaling: the build vs buy question. 

The build vs buy dilemma

Building involves developing custom software from scratch. This lets you fully customize the software to your exact needs, but it does come with a cost, in terms of money, time, and people resources. 

To build a robust, functioning software product, you’ll need in-house resources and expertise who have the bandwidth to take on a large-scale project. In most cases, however, companies bring on third-party companies to help them do the build-out. 

Buying, on the other hand, is a bit more hands-off. This involves buying existing, purpose-built solutions. The explosion of Software as a Service (SaaS) has made this an especially popular option in the last decade or so, giving teams the option to pay subscription fees for access to the software, rather than putting down large flat fees for the enterprise software of the past. 

Some popular “buy” examples are CRMs, accounting/financial management software, human resource management software, marketing automation software, and user assistance software.

The advantage of buying

In most cases, buying is a better option than building. It gives you cost savings, flexibility, scalability, speed, and access to industry-specific expertise. 

Cost efficiency

When you build custom software solutions, the initial development costs are often steep. Although the exact price tag can vary depending on the complexity, size, and scope of the software you want to build, there are some general guidelines:

  • Small apps - $100,000-$200,000
  • Medium-sized apps - $200,000-$400,000
  • Large enterprise-grade apps - $400,000+

And that’s just the initial costs. You also have to figure in the ongoing costs, which add on 20-40% of the initial development costs each year for things like basic maintenance, support services, updates and enhancements, hosting, and security. 

Buying software, on the other hand, comes with a much lower cost. While there may be some initial implementation fees for more complex software, these initial costs are much lower.

On top of initial costs, there are very predictable ongoing costs. The typical monthly cost for SaaS products is between $10-$500 per user. And these costs include any needed support, rather than having to pay hourly fees for consulting. This also includes access to any updates to the product. 

Speed

Custom software development can be an extremely lengthy process, with the average implementation time sitting anywhere between 4 and 9 months. This lag may not be feasible when you have urgent software needs. 

Deployment when buying software, by contrast, is much quicker. There are some SaaS products that you may be able to immediately jump into, but for those that require a bit of extra setup, you’re typically able to launch within a few weeks to a few months. 

The speed also comes into play with ongoing usage. Whenever there are any updates to the platform, any new features introduced, or any improvements to the software, users get immediate access, rather than having to wait months (and spend thousands of dollars) building the new functionalities. 

Access to expertise

One of the most important but often overlooked factors in a build vs buy analysis is the access to the domain expertise that software vendors have. 

When you lean on your in-house team or outsource software development to external resources, they likely don’t have as much specific insight into the exam problem you’re trying to solve (they primarily just know how to build great software). 

Specialist vendors, on the other hand, are hyper-focused on solving the problem that you’re experiencing. At Commandbar, for example, 100% of our R&D time goes into making our specific problem better; it’s not just a one-off project. We’re constantly scanning the industry, learning from our customers, and reflecting everything we find back in the product. 

This is the case for any other purpose-built software. Just consider this. Let’s say you need to create a project management platform to help you organize, plan, and optimize your projects. Who do you think is going to create a better product that anticipates even the tiniest details that project management involves: a software development team or an entire team, including software developers but also people in a variety of other departments, who live and breathe project management? 

Scalability and future-proofing

When teams have a custom-built product, no matter how great it is initially, at some point it will need to be updated, in both small and large ways. This could be a large undertaking that adds more time and money to the project. 

Buying commercially built software safeguards you from this by giving you access to consistent updates provided by the vendors. This could include security fixes, new features, and other enhancements that keep the software current. As your business scales, your software will be able to adapt to handle more data and more complex processes with simple plan upgrades, rather than major build overhauls. 

Another important thing to consider here is AI. With the evolution of AI that seems to be getting quicker by the week, there are always new discoveries on how AI could improve products. SaaS vendors are often at the forefront of these trends and give you quicker access to more groundbreaking functionality. 

And finally, purpose-built solutions typically come with a wide range of pre-built integrations and APIs, letting you seamlessly connect to other tools in your existing software stack. And often, these integrations are available out of the box, making it much simpler to create a cohesive stack from the start. Even if you do build integrations into a custom-built software solution, you never know which integrations you may need for the future, meaning you have to go back to building. Many SaaS products are constantly adding to their existing integrations so you don't have to worry about it. 

It’s not just easier, it’s better

Are there some instances where the outcome of a build vs buy analysis points to building a custom software solution being the best option? Sure. There may be some niche solutions that aren’t on the market currently or the current solutions don’t offer enough functionality. 

But for most use cases, there are several SaaS solutions for it. Buying purpose-built software doesn’t just save you time and money, it ensures that you always have the most up-to-date, expert-backed, future-proofed solution available. 

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