Build vs. Buy vs. Subscribe: Comparing Software Costs Over 3 Years

Businesses usually compare software using the wrong number: the price they will see this month. A $200 monthly subscription looks obviously cheaper than a custom build quoted at $30,000. That comparison works only if you stop looking after month one, while most businesses use software for years.

The number that matters is total cost over a realistic horizon—typically three years—across three common paths: subscribing to SaaS, buying a one-time licence, and building custom software.

Why the sticker price is the wrong comparison

Each option has a different cost shape over time, which the starting price hides:

• Subscriptions (SaaS) have a low upfront cost but an ongoing and usually growing cost through more seats, higher usage tiers, and renewal increases.
• Purchased licences have a moderate upfront cost and little ongoing cost beyond optional support, but offer limited flexibility as needs evolve.
• Custom builds have the highest upfront cost, while ongoing costs are usually maintenance and hosting rather than per-seat or usage fees that grow with the business.

A business looking only at month one will almost always choose the subscription. A business looking at year three may find a different answer.

An illustrative comparison

These representative figures show the cost curve for a mid-sized team using a workflow tool, beginning with 10 users and growing to 25 over three years.

SaaS subscription

• Year 1: $6,000 for 10 seats.
• Year 2: $10,800 for 18 seats after a price increase.
• Year 3: $15,000 for 25 seats.
• Three-year total: approximately $31,800.

Purchased licence

• Year 1: $18,000 for the licence and setup.
• Year 2: $3,600 for support and updates.
• Year 3: $3,600 for support and updates.
• Three-year total: approximately $25,200.

Custom build

• Year 1: $30,000 for the build.
• Year 2: $4,500 for maintenance.
• Year 3: $4,500 for maintenance.
• Three-year total: approximately $39,000.

At first glance, the purchased licence wins and the custom build is most expensive. But total cost is only part of the picture, and each figure excludes important effects.

What the figures do not capture

• The SaaS estimate assumes the tool fits reasonably well. If it does not, add the labour and error costs of workarounds and manual reconciliation, which can exceed the licence fee.
• A purchased licence may lock the business into a version or vendor, creating real costs if the product is outgrown or support ends.
• A custom build has the highest upfront figure, but its effective payback can be much shorter if it removes significant labour and error costs elsewhere.

The factors that actually shift the comparison

Growth rate

Per-seat SaaS costs scale with headcount. Fast growth can turn a cheap subscription into a major software expense within a few years, while the ongoing cost of a custom system remains comparatively flat.

Fit

The better an existing tool fits the process, the more likely the cheaper options are genuinely cheaper. A poor fit closes the gap because the business pays staff to work around everything the product handles badly.

Time horizon

Subscriptions usually win over one year. Over three to five years the comparison narrows or reverses, especially when the process is central to operations and unlikely to change fundamentally.

Vendor risk

Subscriptions and licensed products tie the business to a vendor's roadmap, pricing, and continued existence. Most vendors are stable, but this remains a real, difficult-to-quantify difference from owning a system outright.

How to run the comparison for your business

• Estimate SaaS costs using realistic growth, including projected seats, usage, and likely price increases over three years—not today's headcount alone.
• Estimate workaround costs honestly, including the labour and errors created where a generic tool does not fit.
• Get a real custom-build quote that includes ongoing maintenance rather than only the initial build.
• Compare three-year totals rather than month-one prices. The option that costs most today may not cost most over its actual useful life.

The bottom line

There is no universal winner between building, buying, and subscribing. The answer depends on growth, how well an existing tool fits, and how long it will be used. Whatever the choice, compare three-year totals rather than sticker prices. The cheapest-looking option in month one is often not the cheapest by year three.

If estimating these figures is difficult, map the actual process and current tooling costs with someone before choosing a direction.