Did you know that nearly 70% of companies choose to fully or partially develop their own software instead of relying solely on SaaS tools?
Modeso surveyed 200 European companies across various industries to uncover what they choose for themselves – custom software or SaaS tools. The results might surprise you: most businesses either build custom solutions from scratch or blend them with off-the-shelf tools, rather than solely buying ready-made software.
Even though it seems like most essential tools have already been developed and the industry is moving away from the "from scratch" approach, companies still see value in investing time and resources into creating their own custom solutions. Why do they take the harder route?
In this article, we’ll demonstrate the results of our survey, exploring how businesses of different sizes, from startups to enterprises, make a choice between standard and custom tools. We’ll also break down their reasoning and wrap up with recommendations for those making this tough decision.
Build or buy: how do you make a choice?
For our survey, we reached out to product owners, IT leaders, and technology executives from several countries, primarily Switzerland and Germany. Mostly working in finance and healthcare, these companies rely heavily on software, whether for compliance, customer experience, or managing massive amounts of data. 38.5% of the companies we surveyed have more than 5000 employees, and 25.0% have up to 100 employees.
And here’s what we found. Nearly half (44.1%) of the participants don’t choose between buying or building, they combine both. 31.2% stick to standard solutions and only 24.7% of companies choose custom software.
Based on our findings, 79.2% of the companies surveyed work with external partners for software development.
We have already analyzed why tech leaders should choose a full-cycle software development model for building custom solutions. Now let’s take a closer look at each of the three options – buy, build, or combine both – and see how companies explain their choices.
Here are the key reasons businesses lean toward custom-made solutions, backed by insights from our survey:
Businesses often discover that ready-made software lacks the features they need or doesn’t align with their workflows. That’s why companies mention customization as the main reason for building a tailored solution:
For example, service providers for private banks can’t rely on generic tools. Their clients demand precision and exclusivity, and customization lets them deliver both. For these businesses, standard solutions fall short, requiring expensive modifications that still don’t meet all the requirements.
Regulations in industries like finance and healthcare are strict, and compliance isn’t optional. Companies can’t afford errors or instability. This is why many businesses in these industries choose custom-made solutions:
Ready-made software may claim compliance, but it often doesn’t cover every requirement. Custom software allows businesses to build compliance into the core functionality, reducing risk and ensuring ongoing stability.
When you rely on third-party software providers, you’re at their mercy for updates, fixes, and feature requests. Custom solutions, however, give businesses complete control over their technology, allowing them to adapt to changing needs without delays.
Companies that view technology as a strategic asset often choose custom software to align their IT systems with long-term goals.
Pre-built tools often lack flexibility and can become a bottleneck as their businesses grow. Custom software is designed to evolve alongside your company, offering scalability and adaptability over time.
SaaS tools may seem cheaper at first, but ongoing subscription fees, training costs, and modifications to make them fit your workflows quickly add up. Custom software eliminates these recurring expenses and focuses on delivering exactly what your business needs.
Investing in the right solution early on can save significant resources in the long run. For businesses with specific needs, the ROI from custom software often outweighs the initial investment.
So as you can see, the common thread in these responses is the need for flexibility, control, and cost-efficiency in the long run, not just the first months. Businesses in highly regulated or specialized industries like finance and healthcare gravitate toward custom solutions because they can’t afford compromises.
Now let’s see in what cases companies opt for standard software or SaaS.
Here are the main reasons why companies decide to buy software based on our survey:
Startups or small businesses often don’t have the resources to build software from scratch. And that’s not a problem as long as there are affordable tiers for small teams.
SaaS is a quick solution when time and budgets are tight.
Standard software can provide all the required features for businesses with standard needs.
If you have standard workflows, there’s no need to reinvent the wheel by creating new software from scratch. In this case, a ready-made tool can fully fit your needs.
Many commercial tools are designed to be plug-and-play, minimizing the need for extensive setup or support. This is why many businesses opt for ready-made products:
Let’s now examine the reasoning behind combining SaaS solutions with custom ones – the most common choice, according to our survey.
44.1% of the companies in our survey combine off-the-shelf software and custom-built solutions. Here are some of the key reasons why businesses opt for this approach.
Many companies prefer a hybrid approach to save on standard tools and at the same time build custom software where their workflows are different or more complex from the standard ones:
For example, a financial company might adopt a commercially available payment gateway while investing in a custom-built analytics dashboard tailored to its customer’s specific needs.
Companies often prefer using SaaS or off-the-shelf solutions to avoid the challenges of maintaining software systems. For specialized features that go beyond what standard software can offer, custom software development is the way to go.
This approach minimizes the headache of dealing with cumbersome legacy systems while still addressing unique business needs.
Combining the best of both options lets companies cherry-pick the right tools for the job.
SaaS solutions can cover the standard needs, while custom software adds unique features that provide a competitive edge.
With a hybrid approach, businesses can weigh the availability of suitable ready-made tools against the cost and time needed to develop a custom solution.
In summary, many companies adopt a hybrid approach because it strikes the right balance between cost, time-to-market, and the ability to meet specific requirements. Standard software is often ideal for standard functions, while custom solutions allow businesses to fine-tune their systems to their exact needs.
If we sum up everything that was said by the respondents, we can get a clear picture of what you can get by choosing each strategy.
The key aspect to remember is that standard solutions allow you to save costs only if you have small teams and don’t need enterprise tiers that often come with hefty price tags. That’s why enterprises rethink their strategy and turn to custom-built tools:
The cost for ready-made solutions becomes even higher when you need additional integrations for cohesive workflows. To avoid this overpaying, companies with a need for customization build their own software:
And let’s remember that AI changes how we develop software. Currently, the biggest hurdles for custom solutions are the time needed to build them and the cost of hiring developers. But with AI advancing rapidly, it soon will be able to handle a significant portion of software engineering, making it faster and more affordable for companies to build their own products. Technical leaders are already acknowledging this shift:
To conclude, many businesses are drawn to standard software for its ease of use and lower upfront costs, but the reality is that it’s rarely cost-effective for enterprises or companies with specific workflows. To have a true understanding of the costs spent, companies need to consider not only the upfront investments but the total cost of ownership (TCO).
TCO includes:
It is generally calculated with such formula:
When comparing your options, try mapping out a 3 to 5-year TCO projection. Consider not just subscription costs but also potential costs for upgrades, customizations, and the operational inefficiencies that may arise with standard software.
The final lesson is to always look beyond the upfront cost and consider the total cost of ownership. While SaaS might solve immediate needs, custom software ensures a future-proof solution tailored to your unique business goals.
Scalability
Custom software is ideal for growing enterprises, while startups can often meet their needs with SaaS tools.
Hidden costs
Subscription-based tools may be cost-effective for small teams but often become too expensive at enterprise tiers. Consider TCO to find the right balance.
Integrations
If you need a highly integrated system, vote for a custom solution to avoid overpaying for the customization of standard tools.
Strategic fit
Tailored software ensures alignment with your business processes and supports your competitive advantage and long-term business goals.
But to build the right system, you’ll need a software development team that can turn your vision into life. At Modeso, we specialize in creating custom software solutions that combine scalability with cost efficiency.
With a rich portfolio of successful products in finance, healthcare, manufacturing, retail, and other industries, we can help you build a solution that covers all your current needs and prepares you for the future.
Contact us, and we’ll be happy to discuss what we can do for you.
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