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Build vs buy: what five years of software really costs
Compare paying for subscriptions with owning custom software, the way an accountant would: users growing, prices rising, the staff hours lost to workarounds, and maintenance. The figures below are an example. Replace them with yours. Nothing you type leaves this page.
The answer over 5 years
You could spend up to $30,644 on a custom build and still come out even with buying, in total.
Add a build quote above to compare the two year by year.
| Year | Buying | Building | Running total, buying | Running total, building |
|---|---|---|---|---|
| 1 | $9,700 | $600 | $9,700 | $600 |
| 2 | $9,636 | $600 | $19,336 | $1,200 |
| 3 | $10,815 | $600 | $30,151 | $1,800 |
| 4 | $12,301 | $600 | $42,453 | $2,400 |
| 5 | $14,174 | $600 | $56,626 | $3,000 |
How it works
Every year from one to five is costed separately, then added up.
- Buying, each year: users × price per user × 12, where users grow and the price rises by your percentages each year; plus add-ons; plus workaround hours × 52 × the cost of an hour. Setup is added in year one.
- Building, each year: hosting, plus maintenance as a percentage of the build quote, plus any workaround hours that remain. The build quote is paid in year one.
- Break-even budget: the build quote at which both five-year totals are exactly equal. Below it, building costs less; above it, buying does.
- Present value: money paid in later years is worth less than money paid today. Each year is divided by (1 + discount rate) raised to the number of years from now. Costs are treated as paid at the start of each year, so year one is not discounted.
What it leaves out
Tax, financing and inflation in your staff costs are not modelled. Nor is the value a better fit creates: faster quotes, fewer errors, a process competitors cannot copy. Those can matter more than the totals, and they are yours to weigh. The maintenance figure is a planning assumption, not a rule. Ask whoever quotes the build what they expect it to be.
When buying wins
Your process is close to standard, the team is small and not growing fast, and the package fits without daily workarounds. Buy it, and spend the difference elsewhere.
When building wins
Per-user fees climb with every hire, the workarounds eat hours every week, or the way you work is part of what sets you apart. That is when owning the software pays for itself.
Built by Syed Abdullah Shah, who studies Accounting & Finance and builds custom business software. If the numbers say build, tell me what is not working. If they say buy, I will tell you that too.