SaaS vs Custom Software Solution - Which One Fits Right for Your Business?

  • Saurabh Sharma
  • Aug 29, 2022
  • 13 Min Read
saas vs custom sooftware solution

Article posted by

Saurabh Sharma

VP of Engineering

VP of Engineering at Closeloop, a seasoned technology guru and a rational individual, who we call the captain of the Closeloop team. He writes about technology, software tools, trends, and everything in between. He is brilliant at the coding game and a go-to person for software strategy and development. He is proactive, analytical, and responsible. Besides accomplishing his duties, you can find him conversing with people, sharing ideas, and solving puzzles.

Let’s Connect

In the year 2022, it will be almost impossible to successfully manage a business, either a small business or a big organization, without deploying software solutions. For example, you need custom software solutions to keep financial records or SaaS solutions for operations and important business-related tasks like team coordination, client documentation, and communication.

By 2020, 90% of small businesses will have digitized at least one component of their operations. This doesn't even consider the more prominent organizations spending millions on Big Data, the Internet of Things, and Artificial Intelligence.

There's no doubt that you should invest in new and trending technologies for your organization, but how to do so is the real dilemma. You have two options: either purchase a ready-to-use solution or invest in custom software solutions that are exclusive to your organization.

Each stage in the business process requires a comprehensive examination and knowledge of the consequences and advantages. When selecting the software to deploy for your company's operations, you have two choices: SaaS (Software as a Service) and bespoke enterprise software. However, each alternative is relatively different, so it's crucial to take the time to comprehend the main distinctions between the various options before choosing.

You may believe that purchasing and making a piece of technology boils down to price. But as with most significant decisions in life, pricing is not the only element you need to consider. The decision is complex and essential, but I have some meaningful information that you may use to make these choices.

The Debate Between SaaS Solutions and Custom Software Solutions

A battle between custom software solutions and SaaS solutions for small businesses has been raging. The right software tools to assist company operations are crucial decisions that large and small businesses are often forced to make.

Several top-of-the-line solutions are available in the enterprise software market. Businesses may choose the SaaS solution for their small business that best meets the industry requirements or its inbuilt capabilities for their IT infrastructure. This provides many advantages but makes it challenging to identify the best solutions.

In many cases, retaining and implementing the best software is often more complex than first thought. Because of this, a lot of people end up developing tailor-made applications. Custom software solutions are a terrific alternative to typical SaaS, but before leaping, ensure that the advantages outweigh the disadvantages.

The Pros and Cons - SaaS Solutions and Custom Software Solutions

Let’s dive straight into the pool of advantages and disadvantages of both SaaS solutions for businesses and custom software solutions.

SaaS Solutions - Pros

Keep reading to explore the pros of SaaS solutions for businesses, big or small in the following section.

  • Ideal for big corporations
  • Using SaaS-based software is viable for major corporations looking to streamline their internal business operations. Enterprise SaaS solutions are ideal as they bring a lot of benefits to the table like unified working, better collaborations, and communication increased productivity, and help everyone stay on the same page.

  • High-level compatibility
  • The corporate sector has witnessed a proliferation of SaaS solutions that provide a high level of adaptability in recent years. You may be traveling in the wrong direction if the business software-as-a-service (SaaS) you're searching for does not have the connectors your systems need.

  • Facilitate cloud computing
  • Utilizing cloud computing technologies is one of the most significant aspects of most SaaS systems. It improves your company's operations by making your work stream more collaborative stress-free, and quick.

  • Cost-effective
  • SaaS business options are less expensive than custom-built solutions. You may choose from various solutions through a variable-price approach. Selecting SaaS solutions is a better choice if you have a budget constraint regardless of the type and size of the organization.

SaaS Solutions - Cons

  • There is no control over the system. For example, the program cannot be stopped once the command is set to proceed.
  • System features are subject to change, which may result in a reduction of functionality for your company.
  • You may need more than one program from a cloud app. Saas Software solution companies supply various solutions, and based on the characteristics you're searching for, some of those solutions will work better than others, and some just don't fit in.
  • It's possible that using the cloud app would force you to perform more of your work offline so that you can compensate for its drawbacks.
  • Developing your website might be a cost-effective option for redevelopment; nevertheless, this can result in losing a competitive edge if done following "standard practice."

Custom Software Solutions - Pros

Custom business software addresses unique difficulties that the SaaS model does not handle.

  • Address Tailor-made requirements
  • Custom software development agencies create such solutions by keeping client-specific requirements in mind. Most organizations lack the expertise to develop such a product; they often outsource the work to a third-party developer.

    With a custom enterprise software solution, you receive a tool made exclusively for your company, saving you from having to modify your internal procedures or several different programs.

  • Flexibility
  • Sometimes a unique solution offers more freedom in terms of design and functionality, the ability to be deployed anywhere, and the ability to support additional integrations. But there are costs associated with these benefits.

  • Building Brand
  • Developing a custom software solution helps build your brand among employees, clients, and end-users. Customization of software solutions involves placing the company's name and logo, specific layout, and company's color platelet to give brand recognition to software solutions. A lot can be achieved in terms of branding if you partner with a capable and experienced custom software development agency.

  • Competitive Advantage
  • Thanks to custom software, you can be more efficient and provide services that your rivals cannot deliver in your segment. You get the much-needed upper hand in today’s competitive business environment.

Custom Software Solutions - Cons

  • The creation of a software life-cycle requires a significant amount of time.
  • Funds can be a matter of concern as a custom software development agency would be more expensive to work with than a SaaS solutions company.
  • Perform routine maintenance to ensure smooth operation (which may result in increased downtime).
  • Because you are the only one with access to the data, you are responsible for its security.
  • Finding the appropriate people to work with can be challenging.

The Cost Factor

Although there are different benefits and drawbacks associated with each solution, the cost involved is often one of the most critical, if not the decisive, factors.

However, these two approaches to the software are pretty distinct from one another, and as a result, their pricing structures reflect that.

For instance, if you use the software provided on a subscription basis, you (along with hundreds or thousands of others) will pay a vendor for access to the same functionality. You are responsible for paying for their expenses in a specific manner.

In the case of custom software, on the other hand, you collaborate with software developers to create, test, and launch a one-of-a-kind product that is reserved exclusively for your business.

The overall price of development services is determined by several aspects, such as the breadth and length of the product and its schedule.

Keeping this in mind, let's discuss how we may compare the two:

Pricing Models and Examples Utilizing SaaS

Because there is a great deal of variation in the prices of SaaS, we will discuss the most typical ones here.

Regardless of the model you choose, though, the cost will most likely be comprised of two components:

  • The cost of the subscription
  • You will be required to pay a recurrent fee to maintain ongoing access to the product and get automated maintenance and updates. There are a variety of contract lengths for subscriptions, including month-to-month, quarterly, semi-annual, and yearly.

  • One-time installation pricing
  • At the beginning of the process, you will have the option to pay a one-time fee for the product configuration and instruction. Your subscription to a piece of off-the-shelf software includes a license for a certain amount of time that allows you to use the product. The fine print of your agreement with the SaaS solutions company will include all the information on your license regulations.

But how will they decide how much to charge for the subscription?

The following are a few of the most popular approaches that SaaS solutions firms use to price their goods.

  • Flat rate
  • The flat-rate subscription charge is the most fundamental business model, but it is also the one that is used the least. Every user is responsible for paying the same price to access the same features, number of users, and so on.

    Is it beneficial for subscribers to have a flat fee model? It is dependent upon the amount of time you spend using the program.

    If you only use the program on a sporadic basis, purchasing it at a premium price may not be worth it for you. On the other hand, if you use the service often, it can be money well spent.

  • Usage-Based
  • Utilization-based programs resemble your mobile phone plan in this respect. Each month, you pay a variable fee depending on the volume of data, the number of users, API calls, etc.

    For small businesses, usage-based pricing might be a terrific option. Because they don't utilize sophisticated features very often, they may buy them for a reduced price. It's also possible for large corporations to cut costs if they can alter the amount of money they spend.

    However, if teams expand, license prices based on the number of users or the data they generate may quickly become prohibitively expensive. Remember that you're not paying for additional features. You may spend more and more, but the product's worth will remain static.

    It's not uncommon to see solutions that mix tiered pricing with usage-based parameters like the number of users.

  • Tiered Price Structure
  • Typically, a provider will offer several products in this standard style. More features, users, etc., are included as the price of each package rises. Depending on how quickly they expand, the tiers may be a good fit for certain businesses.

    You'll get promoted as your company grows and necessitates more sophisticated features. Even if you require one function, you might pay a lot more for a higher tier to have access to it.

Pricing Models for Custom Software

The cost of developing custom software is comparable to that of a typical professional service. The scope and budget of the project are established with the help of a software development partner. The customer charges for the time spent working on the program.

If you're going to build anything from scratch, you’d need to spend a lot more money upfront. Plan, create, and build your solution from the ground up (an entire software development life cycle).

When calculating the entire cost of your project, what are the most important things to consider?

In terms of size, a small project may be a basic mobile app with a few screens, while a massive project might be a customized online platform with several modules.

Data integration into numerous systems, database demands, or intensive UX/UI design are all examples of more complex projects.

Development A team's size may be determined by the kind of project and its complexity, including the number of developers, UX/UI designers, project managers, and systems analysts.

The duration of a project might range from a few weeks to a few months. The delivery of custom software projects often occurs in stages. Therefore, expenditures are distributed throughout the project and depend on the amount of time and effort invested by the developers throughout each phase.

How do you make your choice?

There are many different angles from which you may consider the subject of whether you should spend money on custom software development or set up a SaaS solution. But in the end, everything ought to boil down to the program's function. The following is a list of questions for you to consider as you determine which option is best for your firm.

  1. What is your spending limit?

  2. The amount of money you have available to spend will be the most critical factor in determining which option will be most beneficial to your organization right now.

  3. When do you anticipate having this solution available?

  4. Do you need a solution right now, or do you have the time to wait for a tailor-made solution to be designed and constructed just for your needs?

  5. What's the problem you're facing?

  6. Suppose you're sick and tired of piecing together numerous internet solutions to satisfy your demands. If a software as a service (SaaS) alternative offers just what you want, you should go with that. The answer you wish to use will influence whether you use a SaaS provider or develop your software. It may be time to meet with a software development firm and discuss the possibility of constructing a custom software solution for your business.

  7. Where do you see yourself in the years to come?

  8. How do you see this solution contributing to your twelve-month success? Will this solution be able to adjust and transform along with the growth and development of your company? If this is not the case, would it be beneficial in terms of time and money to choose a solution that will only need to be changed after one year?

As a business owner, answering the mentioned questions will give you a better understanding of the need and importance of which type of software solution can contribute to your company's success. Selecting the correct type of solution enhances the employee's productivity by concentrating their attention on the tasks that are most important to the success of operating business functions. This industry has a lot of room for savings and increased customer happiness.

Consider these aspects when deciding on the software service provider

There are significant steps to consider when deciding on the best software service provider for your business and your needs.

  • Assessment
  • When working with a software partner, you begin by assessing your company's demands and technical specifications. For example, the product roadmap covers your budget, timetable, and technical strategy you'll be making.

  • Design/Architecture preparation
  • Conducting user research and testing may validate the design of a product. (which minimizes the risk of building the wrong thing). With your partner, you conduct brief workshops that produce software prototypes and data maps.

  • Development
  • Your concept is transformed into an authentic software product using agile approaches. It's time to go live and provide support.

You and your software service partner work together to test and launch the product. For successful implementation, they may also give training. This ongoing support and enhancement may utilize the maintenance plan you signed up for after go-live.

Last Thoughts

Finally, the best option is to determine the feasibility based on critical aspects such as your unique company needs and available resources. Choosing SaaS may be your best alternative if you have a restricted budget and your needs are likely to be met by the ready-made product.

On the other hand, custom business software may be the best option if you have the resources and want to design a solution to meet unique demands.

We have delivered various SaaS solutions to small businesses and custom software solutions to large corporations. The goals and requirements of your organization will determine whether you choose custom-built software or SaaS. Therefore, we'll always discuss your alternatives with you during consultation.

The upfront cost of custom software makes you feel like a costly affair for an IT setup. But it's crucial to remember that over time, licensing fees may pile up, and spending more on regular maintenance might save you money and effort in the long run.

In the end, you could discover that custom software development is the most affordable and beneficial option for your company when you account for possible inefficiencies, unanticipated demand changes, mistakes brought on by data duplication, etc., and keep in mind that you don't always have to choose between the two. In some instances, SaaS solutions might add a new layer to deliver just the essential features that are unique to your company.

Whatever the situation may be, discover a solution that will assist you in optimizing your company procedures. Begin by locating an experienced software development partner to help you integrate your processes with your best-chosen solution, leaving the enterprise software vs. SaaS discussion behind.

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We are living in a technology-driven world where almost everything is available at our fingerti…

Salesforce CRM Pros & Cons for Businesses

Is Salesforce CRM the Best Choice for Your Business? Pros & Cons

Customers are the most important part or lifeblood of a business. The way you onboard customers…

eCommerce store development With Shopify

Ultimate Guide to Build Profitable eCommerce Store With Shopify

To start an eCommerce business that becomes successful, the first step is to develop an enticin…

How to Start a Fintech Startup

Ultimate Guide on How to Start a Fintech Startup

Fintech or financial technology has become one of the most popular ideas for startups today. In…

Recruiting Software Development

Is Your Recruiting Software Ready for the Future of Work?

Recruiting software is a critical part of Human Resources Management (HRM). Basic functionality…

Top 5 Roles in Your Software Engineering Team

Are These 5 (Minimum) Roles On Your Engineering Team? They Should Be!

It can be very challenging and overwhelming to develop technology and software for a non-tech o…

Being Cheaper is Not a Competitive Advantage

Being Cheaper is Not a Competitive Advantage

As someone who attends dozens of startup pitches a month, “our product is cheaper” is a phrase …

Case Study: 6-Months in and Software Vendor Causes $160,000 Loss

Case Study: 6-Months in and Software Vendor Causes $160,000 Loss

PACEfunding’s Business Executive Is Shocked When The Vendor He Hired Fails To Deliver The Softw…

Control and Fear Aren't Your Company's Only Growth Problem

Control and Fear Aren't Your Company's Only Growth Problem

The Invisible Crushing Power of Software Why are companies afraid to partner with the vendors …

Software Bugs Risk $1.7 Trillion in Assets

Software Bugs Risk $1.7 Trillion in Assets

Painful Lawsuits: Huge Toll Taken on Executives at Uber, Equifax, St.Jude, and Provident Financ…

Startup Pitch Event, November 9th, 2017

Startup Pitch Event, November 9th, 2017

As my regular readers know, I frequently serve as a panelist in pitch events. Recently, I decid…

Startup Pitch Event, October 30th, 2017

Startup Pitch Event, October 30th, 2017

As my regular readers know, I frequently serve as a panelist in pitch events. Recently, I decid…

Startup Pitch Event, October 11TH, 2017

Startup Pitch Event, October 11TH, 2017

As my regular readers know, I frequently serve as a panelist in pitch events. Recently, I decid…

Startup Pitch Event September 26th, 2017

Startup Pitch Event September 26th, 2017

As my regular readers know, I frequently serve as a panelist in pitch events. Recently, I decid…

How Can MoviePass Be So Cheap?

How Can MoviePass Be So Cheap?

MoviePass caused major shifts in the movie industry when they lowered their monthly unlimited m…

User Experience is Key

User Experience is Key

There is nothing more tragic than a company with a great product that is hampered by poor user …

Investors Aren't Afraid of Smart Tech Outsourcing

Investors Aren't Afraid of Smart Tech Outsourcing

One of the most misunderstood fears entrepreneurs and startups have is that investors won’t inv…

Three Software Mistakes That Strangle Startups

Three Software Mistakes That Strangle Startups

I love meeting people who launch startups. Their energy and ambition inspire me. One of my life…