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Why the build vs buy decision matters

The world is in flux, and your software users’ needs change constantly. Evidently, you want to build the best possible product for your customers. But that task is less than evident. Product teams are juggling many priorities that require scarce engineering resources. Meanwhile, engineers are swamped. Too many projects, and too little time to complete them.

Developing new features can easily take months. Therefore, SaaS companies are exploring alternatives to move faster. Many of them are considering to buy vs build software to further improve their product. As a SaaS CEO, this decision is critical to the success of your business.

But which route is right for you?

In this guide, you’ll get actionable advice to make the right decision as a SaaS CEO. Read on for a deepdive into the build or buy analysis!

Two SaaS builders discussing to build vs buy software

Pros and cons of building software in-house

In general, product and engineering teams prefer building product features in-house. For example, in our PropTech SaaS trend report, a striking 75% of respondents say they built reporting features in-house, instead of choosing an embedded analytics solution.

This natural aversion to buying software is no surprise. As a SaaS builder, your love for building products led you to starting a SaaS business in the first place. There’s nothing like the thrill of building something from zero. And the potential to change the lives of many.

If you’ve built software products before, you know the many benefits of building all product features in-house.

  • Complete control over the development process
  • Tailored solution to specific business needs
  • Intellectual property ownership

But like any approach, building software in-house has its drawbacks.

  • Higher development costs
  • Longer development timeframes
  • Increased risk of errors and bugs

Especially for product features that lie far from your core business, in-house development isn’t without risks. Without the right expertise in your team, your product is more prone to errors and roadmap delays.

Still, in-house development is the better option for building your core differentiators. With the following considerations, you’ll increase your chances of success.

Pros and cons of buying third-party software

If you had unlimited time, budget and resources to build all the cool product features your customers want, you wouldn’t be reading this article. The reality is that SaaS companies always want to grow faster than their current resources allow.

For that reason, more and more SaaS execs are considering buying third-party software and integrating into their existing product. Buying vs building software has many benefits for software teams that want to scale quick on a shoestring budget.

  • Reduced development costs
  • Faster time-to-market
  • Unburdening developers
  • More standardized solutions with premium UX

Despite the obvious benefits, many SaaS founders still fear the risks of buying a third-party software.

  • Fear of limitations of low-code tools
  • Fear of not having 100% control over a product feature
  • Fear of incompatibility with current tech stack

There are plenty of buy vs build success stories to debunk these myths about software development outsourcing through integrations. However, selecting the right vendor will be essential to your success. Below are a few criteria to consider.

  • Proven track record and reputation
  • Scalability and future-proofing
  • Integration capabilities and compatibility

Important considerations for the build vs buy decision

The cost to build vs buy software

Cost is a critical factor in making the build vs buy decision. SaaS teams wrongly believe that building software in-house is the cheapest option. But the cost of a yearly software license comes nowhere near the cost of custom software development.

The most overlooked costs of building product features in-house are:

  • 💸 salary cost of dedicated developers
  • 💸 costs of hardware and software to develop, test and deploy a feature
  • 💸 ongoing maintenance and quality assurance cost
  • 💸 the opportunity cost of dedicating resources to non-differentiating features

With the average US developer salary clocking out at $95k per year, building features in-house can make a giant dent in your company budget. Buying a third-party solution, on the other hand, can save you time and money.

  • 🫰 third-party software integrations start as low as a few thousand dollars a year
  • 🫰 maintenance and updates are at the vendor’s expense
  • 🫰 with a faster time-to-market, you can monetize product features faster

Ongoing maintenance can skyrocket the total cost of ownership (TCO) when you build software in-house. Therefore, buying a third-party software is almost always the most cost-effective option. However, be mindful upfront about any hidden costs. If your setup needs a lot of customizations or custom integrations, you might end up disappointed.

Customization vs standardization

If you build a product feature in-house, even the smallest detail is for you to decide. With endless customization, SaaS product teams can tailor the software to their needs. Having full control is especially useful in industries with many (legal) requirements, like healthcare or finance.

Third-party software solutions almost always start from a standard package that serves many. Although your solution is standard, these off-the-shelf components give you a headstart at a much lower cost. To make sure it meets your individual use case, these tools often come with customization options on top. You can either develop customizations yourself using an open API, or pay for professional services and have it done for you.

And remember, third-party software vendors are experts in their domain. If you buy their off-the-shelf solution, it means you’re buying a package that meets industry standards and follows best practices by default.

To decide what’s best for you, you’ll have to balance your needs against resources. Are deep customizations necessary for a functional MVP? Or is time of the essence? This will help you make a better assessment of whether to buy or build.

Why you should buy vs build analytics

Scalability of in-house vs third-party solutions

Choosing between buying vs building software right now means choosing for the future too. You’ll want to ensure your choice will scale as your product and user base grow.

Building in-house means you can scale when and how you want. You have much more flexibility to add features as you go. With full control over the roadmap, you’ll work closely with product and engineering as you grow. However, you’ll need to sacrifice a good deal of resources to keep building and maintaining these features.

Third-party software solutions, on the other hand, are scalable by design. You add users, features, and functionality as needed over time. Not only is it faster, but also cheaper for startups that scale fast but lack the resources and expertise to develop the software in-house. However, beware of the caveats. Ensure you understand any limits as to how far you can customize to make sure you’ll meet your product users’ unique needs in the future.

Both options can support SaaS companies as they scale, depending on your unique needs. Companies that think about future-proof solutions early on will have higher chances of making the right choice.

Maintenance costs of build vs buy software

SaaS companies often overlook the cost of maintenance and ongoing support. Therefore, it’s an important factor in your build vs buy software analysis.

Bug fixes, security updates, and new feature development will be an ongoing process if you decide to build in-house. Not only are the costs and effort high, but you need to take into account logistical challenges. If crucial developers leave your company, you may lose all resources and expertise to handle ongoing maintenance. And it leaves you with an even larger hole to fill.

Taking the buy road comes with include ongoing maintenance and support included. However, don’t be mistaken by the long-term costs of licensing fees, customizations, and potential upgrades. Costs can quickly add up, and you may not be aware of it at first.

Making a back-of-the-envelope budget calculation will prepare you to make the right decision. Uncover hidden costs of buy and build approaches upfront and reap the benefits later.

A build vs buy software flowchart for SaaS builders

Now you know which requirements to keep in mind when building or buying software for your next product feature. Use this simple flowchart below to make the decision for any development project on your roadmap!

Flowchart: should you build vs buy software

Making the build or buy decision

We hope this thorough build vs buy analysis helped you weigh the pros and cons of each approach. You can now make an informed decision that best fits your company’s needs and goals.

Is client-facing reporting on your roadmap, but unsure whether to buy or build analytics? Get in touch with our product experts, and explore the power of off-the-shelf reporting dashboards.

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