Build Or Buy
Compare total cost of building a product in-house versus buying from a vendor. Analyze development costs, licensing fees, maintenance, and break-even timeline with interactive charts.
Build (In-House)
Buy (Vendor)
Time Horizon
About This Calculator
The Build vs Buy decision is one of the most critical choices in software procurement and business strategy. This calculator helps you compare the total cost of ownership (TCO) between developing a solution in-house and purchasing a commercial off-the-shelf (COTS) product from a vendor. Whether you are a startup evaluating a CRM platform, an enterprise considering custom ERP development, or a product manager comparing SaaS subscriptions vs internal builds, this tool provides an objective cost comparison.
The calculation uses a straightforward total-cost model. For the Build option, total cost = one-time development cost + (annual maintenance & operations cost × evaluation period). For the Buy option, total cost = one-time implementation cost + (annual license/subscription cost × evaluation period). The calculator then computes the net savings (which option is cheaper), the break-even year when cumulative costs equalize, and a year-by-year projection so you can see how costs evolve over time.
Regional Considerations
India (IN): Development costs are typically lower with a large talent pool. Annual license costs for enterprise SaaS (₹2-5 lakh/yr for mid-market tools) should be evaluated against in-house team costs including salaries, infrastructure, and benefits. Consider GST of 18% on most SaaS purchases.
United States (US): Development costs are higher ($100K-$250K+ for a typical web application). SaaS subscriptions range from $20/user/month for small tools to $50K+/yr for enterprise platforms. Factor in sales tax based on your state and potential R&D tax credits for custom development.
United Kingdom (UK): Development costs vary widely (£50K-£150K for a basic application). SaaS costs are comparable to the US in GBP. Consider VAT at 20% on software purchases and the R&D tax credit scheme for custom development projects.
Frequently Asked Questions
What is a build vs buy decision?
A build vs buy decision compares the total cost of developing a solution in-house versus purchasing an off-the-shelf product from a vendor. It factors in one-time costs like development or implementation, plus ongoing expenses like maintenance and subscriptions, over a defined time horizon.
How do you calculate the total cost of building in-house?
To calculate the total cost of building in-house, add the one-time development cost to the annual maintenance and operations cost multiplied by the number of years. The formula is: Total Build Cost = Development Cost + (Annual Maintenance Cost x Years).
How do you calculate the total cost of buying from a vendor?
To calculate the total cost of buying from a vendor, add the one-time implementation cost to the annual license or subscription cost multiplied by the number of years. The formula is: Total Buy Cost = Implementation Cost + (Annual License Cost x Years).
What is a break-even year in build vs buy analysis?
The break-even year is the point in time when the cumulative cost of building in-house equals the cumulative cost of buying from a vendor. Before this year one option is cheaper, and after it the other becomes more economical. If no break-even occurs within the evaluation period, one option is consistently cheaper throughout.
Should a startup build or buy software?
Startups should generally buy software when available off-the-shelf since it saves time and reduces upfront costs. Building may be justified when the software is a core differentiator, requires custom integrations, or when subscription costs exceed development costs over the long term. Use this calculator to compare costs objectively.
What costs are included in a build vs buy analysis?
For the build option, include development cost, annual maintenance, hosting, and personnel. For the buy option, include license or subscription fees, implementation and setup costs, training, and annual support. Hidden costs like downtime, migration, and opportunity cost should also be considered in a full analysis.
Is this calculator free to use?
Yes, this Build Or Buy calculator is completely free to use with no registration required. You can save and share your calculation results via URL.