Own software instead of SaaS subscriptions: costs, risks and break-even

By Roy Van Eijsselsteijn, CEO of Interactivated

Every year the renewal invoices come in a little higher, and sooner or later someone in the company asks the obvious question: wouldn't it be cheaper to have our own software built? Rising SaaS costs make that a fair question, and sometimes the answer really is yes. Own software beats subscriptions only when your seat count, price increases or the fit with your process tip the balance, and it comes with risks of its own. In this article we lay out both sides honestly: what each route really costs, how you calculate the break-even point, and how you avoid swapping one kind of lock-in for another.

What do SaaS subscriptions really cost?

The price on a vendor's website is usually the smallest part of what software subscriptions end up costing you. If you want to compare honestly, it helps to count every line below for each tool you use:

• The seat price. This is the monthly price per user, multiplied by every person with a login, including colleagues who only ever need to look.
• Tiers. Needing just one feature from a higher tier can push your whole account up a level, and every seat with it.
• Add-ons. Extra modules, storage, contacts or usage credits are often billed on top of the base price.
• Integrations. Keeping data flowing between systems usually means connector tools, and those come with subscriptions of their own.
• Admin time. Someone spends hours on settings, user management, workflows and fixing links that broke after an update.
• Price changes at renewal. Software licence costs are set by the vendor, and they can change every time your contract renews.

So what belongs in the total? Every line above, per year, for every tool that does the same job or holds the same data. That last part matters more than most people expect. Overlapping tools are very common, and good SaaS management always starts with a complete list of what you pay for and who actually uses it.

What does your own software cost?

Own software, or custom software, swaps a monthly subscription for a build cost up front and a running cost after that. To make a fair comparison, both need to be in your sum:

• Build. The design, development, testing and data migration needed for the first version.
• Hosting. The servers or cloud services the software runs on, including backups and monitoring.
• Maintenance. Keeping frameworks and libraries up to date, fixing bugs and making small improvements along the way.
• Security. Applying patches, testing for vulnerabilities and managing who has access to what.
• Support. Help for your users, and someone to call when something breaks.
• Product ownership. A person in your company who decides what gets built next and keeps the software in line with how the team actually works.

One point is easy to forget when you are excited about building: the running cost never reaches zero. Software that nobody looks after slowly turns into a risk. If you want to see how we treat build, hosting and maintenance as one product, read more about SaaS development.

AI-assisted development does make a real difference to the build. Senior engineers who work with AI tooling can produce working code noticeably faster. What it does not do is remove the running cost, the security work or the need for someone to own the product.

Total cost of ownership: how to calculate the break-even point

The total cost of ownership of software is everything you pay to acquire a system, run it and eventually leave it, over its whole lifetime, not just its price tag. That is the basis on which you should compare both routes, over the same period. A window of three to five years usually gives a realistic picture.

Over N years, the totals look like this:

TCO_A = O_A + N × (S × P × 12 + X + A_A) + E_A

TCO_B = B + D + N × (H + M + A_B)

Own software pays off when TCO_B comes out lower than TCO_A. The best way to fill it in is one row at a time, using real figures from your invoices and from the quotes you receive. Be strict with yourself here: leave nothing at zero unless it truly is zero.

To make it concrete, take one tool, for example your current CRM. Put last year's invoice under rows 2 and 3, make an honest estimate of the admin hours for row 4, and ask a builder to quote B, D, H and M. For a step-by-step example applied to a CRM, see our article on choosing a custom CRM or HubSpot.

What happens to the outcome when your team grows or prices rise

The break-even point is not a fixed number. It moves as your company changes, so it is worth running the sum again with each of these scenarios and seeing which way it goes:

• Your team grows. Every new colleague adds to the subscription, every month. The cost of your own software barely changes with headcount, so growth moves the outcome towards building.
• The vendor raises its prices. A higher price per seat, or a forced move to a higher tier, raises route A for every remaining year. That also moves the outcome towards building.
• The build scope doubles. If the first version suddenly has to do twice as much, B grows with it, and part of M does too. That moves the outcome back towards subscriptions.
• Your team shrinks. With fewer seats, route A gets cheaper while route B stays roughly the same. Building then becomes harder to justify.

The lesson we take from this is simple. Own software is most sensitive to scope, while subscriptions are most sensitive to headcount and price. If you keep the first build small, your business case will hold up best.

Vendor lock-in: what it is and what leaving costs

Software vendor lock-in means that leaving a product would cost you so much time, money or data that you stay, even when it no longer suits you. It rarely happens overnight. It builds up slowly, through three mechanisms:

• Data export limits. You can usually export your records, but not always the history, attachments, relations or automation logic. Part of what you built simply does not come with you.
• Proprietary workflows. Your automations, scripts and reports live in the vendor's own tools, and they have to be rebuilt from scratch somewhere else.
• Price power at renewal. Once your processes depend on a tool, the vendor knows that switching is expensive for you. That quietly weakens your position at every renewal.

The longer you use a tool, the more dependent on a software vendor you become in this way. That is not a reason to avoid SaaS altogether. It is a good reason to include the exit cost (E_A in the formula above) in your sum, and to check the export options before you sign anything.

Lock-in with your own software: what to arrange in the contract

Own software can create a new kind of vendor lock-in: dependence on the company that built it. If only they understand the code, you are just as stuck as you would be with a SaaS vendor. The good news is that this is easy to prevent if you arrange it up front. These are the points to agree with any builder, and that includes us:

• Code ownership. The contract states that the source code and the data model belong to you, including every future change.
• Repository access. The code lives in a repository you own, or can access at any time, and not only on the builder's own systems.
• Documentation. The architecture, data model, deployment and integrations are documented well enough for another team to pick up the work.
• Hosting in your name. Servers, domains and cloud accounts are registered to your company, or can be transferred to you without conditions.
• Handover and exit terms. The contract describes what happens if you ever switch builders: what is handed over, in what form, and within what period.

With these in place, the risk of builder lock-in becomes small. Without them, your own software can actually be harder to leave than any subscription.

When your own software does not pay off

When companies weigh SaaS or custom software, the honest answer is often simply to buy. Own software rarely pays off in these situations:

• Your team is small. A handful of seats costs less per year than running a system of your own.
• Your need is standard. If an existing tool already fits the way you work, building it again adds cost without adding value.
• Nobody can own the product. Without a person who sets priorities, and a maintenance agreement behind it, your own software will fall behind and become a risk.

If one of these sounds familiar, the better move is to clean up the tools you already have and cancel the ones that overlap. That alone can save more than you might expect.

Start small: replace one tool as a pilot

The safest way to test your business case is to replace one tool, not your whole stack at once. SaaS sprawl grows one subscription at a time, and it can be reduced the same way.

1. Pick the tool. Choose the one that costs the most and fits the worst: a high bill, plenty of workarounds and data that is still copied by hand.
2. Measure the baseline. Write down what that tool costs today, using the cost lines above, and how much time the team loses on workarounds.
3. Scope the pilot. Limit the pilot to the workflows the team uses every day. This is the MVP approach: the smallest version that still does the real job. Read more about MVP development.
4. Run it next to the old tool. Use both side by side for a set period and compare the results before anyone switches for good.
5. Measure against the baseline. Did cost, time and errors go down? Then cancel the subscription and decide which tool comes next.

If the pilot works, you can extend the platform step by step from there. For how to move from several packages to one platform, see our guide on choosing a new ERP or one platform of your own.

Frequently asked questions

How we approach this at Interactivated

When a company comes to us with this question, we do not start by talking about what we could build. We start with the numbers. Together we list the tools you pay for, look at the actual invoices and fill in the cost lines from this article with real figures, including the admin hours that never show up on an invoice.

If building makes sense, we look for the one tool that costs the most and fits the worst, and we scope a pilot around the workflows your team uses every day. That pilot runs next to the existing tool for a while, so you can measure the difference before anyone has to switch.

Our senior engineers build with AI tooling, which helps us deliver a working first version faster. Every part of it is still reviewed by experienced engineers, because the data model and the security decide whether the software will still be easy to maintain years from now.

We also agree on ownership up front: the code, the repository and the documentation are yours, so you are never locked in with us either. After launch we keep the software hosted, updated and secure, and we keep developing it with you. And when our honest conclusion is that a subscription will serve you better, that is exactly what we will tell you.

Build your business case together

Want to know whether your own software would pay off for one of your tools? We are happy to work through the cost lines with you, pick a sensible pilot and show what it would take to build and run. If a subscription remains the better choice, we will tell you that too. Plan a conversation about one pilot tool.