The build-vs-buy decision is one of the most consequential choices a technology leader makes. Get it wrong, and you're either locked into a vendor that can't meet your needs or maintaining custom software that drains your engineering resources.
SaaS makes sense when the problem is well-defined and standardized across industries. Payroll, email, CRM — these are solved problems. Fighting commodity battles with custom code is a waste of talent.
Custom software becomes the right choice when the system IS your competitive advantage. If the software directly generates revenue or creates operational differentiation, owning it is a strategic imperative.
The hybrid approach is often optimal: use SaaS for infrastructure and commodity functions, build custom for your core differentiators, and connect everything through well-designed APIs.
Total cost of ownership over 5 years is the right lens. Custom software has higher upfront costs but often lower long-term costs for high-usage systems. SaaS costs scale linearly with seats — custom doesn't.