How the costs are calculated
The calculator adds up, year by year, what each option costs and compares the cumulative totals:
Build, year 1 = development hours × cost per hour + hosting per month × 12
Build, year 2 to 5 = development cost × % maintenance + hosting per month × 12
Buy, year n = seats in year n × price in year n × 12
(+ implementation cost in year 1)
seats in year n = users × (1 + annual user growth)^(n − 1), rounded up
price in year n = price per user × (1 + annual price increase)^(n − 1)The crossover year is the first year in which the cheaper option changes. The best option over 5 years is the one with the lower cumulative cost at the end of year 5.
Worked example
A company needs an internal tool for its operations team. Building it takes 1,200 hours at $75.00 per hour, plus $500.00 a month of hosting and 20% of the development cost each year for maintenance. Buying a similar SaaS product costs $40.00 per user per month for 50 users who grow 20% a year, with a $10,000 implementation and a 5% price increase every year.
- Development cost: 1,200 × $75.00 = $90,000
- Build, year 1: $90,000 + $6,000 of hosting = $96,000; then $24,000 a year ($18,000 of maintenance + $6,000 of hosting)
- Buy, year 1: 50 seats × $40.00 × 12 + $10,000 = $34,000
- Buy, year 5: 104 seats × $48.62 × 12 = $60,678 in that year alone
| Year | Build (cumulative) | Buy (cumulative) | Cheaper |
|---|---|---|---|
| Year 1 | $96,000 | $34,000 | Buy (SaaS) |
| Year 2 | $120,000 | $64,240 | Buy (SaaS) |
| Year 3 | $144,000 | $102,342 | Buy (SaaS) |
| Year 4 | $168,000 | $150,685 | Buy (SaaS) |
| Year 5 | $192,000 | $211,363 | Build |
Costs cross in year 5: from then on, building is cheaper. Over 5 years, building saves $19,363, but buying is cheaper for the first four years and needs far less money up front.
Amounts are rounded exactly as the calculator shows them; each step uses the unrounded values.
Beyond the numbers
Total cost is only part of the decision. Consider these questions too:
| Question | Points toward building | Points toward buying |
|---|---|---|
| Is it core to how you compete? | Yes, it is a differentiator | No, it is a standard process |
| How fast do you need it? | You can wait months | You need it in weeks |
| Do you have a team to maintain it? | Yes, with long-term ownership | No, or the team is busy |
| How specific are your needs? | Very specific workflows | Common needs most tools cover |
| How fast will users grow? | Fast growth makes per-user pricing expensive | Stable or small user base |
Tips for a fair comparison
- Estimate development hours honestly. Add time for design, testing, documentation and deployment; first estimates are usually too low.
- Do not forget maintenance. Software that is not maintained becomes a security and reliability risk.
- Read the SaaS pricing tiers. Price increases, minimum seats and features locked to higher plans change the result.
- Include implementation on both sides. Data migration, integrations and training cost time whichever option you choose.
- Check the exit cost. Switching away from a SaaS product or rewriting an in-house tool later both have a price.
- Revisit the decision. What makes sense for 50 users may not make sense for 500.
What this estimate does not include
The cost of delay while you build, the value of features you get from the vendor for free, internal management time, taxes, discounts for annual billing and the opportunity cost of your developers working on this instead of your product. Use the result to frame the decision, not as the only criterion.
Frequently asked questions
How is the cost of building calculated?
Year 1 includes the development cost (hours × cost per hour) plus twelve months of hosting. From year 2 on, each year adds hosting plus annual maintenance, calculated as a percentage of the original development cost.
How is the cost of buying SaaS calculated?
Each year you pay the price per user × the number of users × 12, plus the one-time implementation cost in year 1. Users grow and the price increases every year at the rates you enter, and seats are rounded up because you cannot pay for part of a user.
What does it mean when the costs cross?
Building usually costs more at the start and less later, while SaaS costs little at first and grows with users and price increases. The crossover year is the first year in which the cheaper option changes, looking at cumulative costs.
Why is maintenance only counted from year 2?
In the first year the team is still building the software, so that effort is part of the development hours. Once it is in production, it needs bug fixes, updates and security patches every year; 15–25% of the development cost is a common rule of thumb.
Is the data I enter stored anywhere?
No. All calculations run in your browser. Values only leave your device if you use the share button, which puts them in the link you copy.