Build vs. Buy Software: A Decision Framework for Growing Businesses

The short answer: It depends on whether your processes are your competitive advantage or just operational necessities.

According to Gartner's 2024 technology spending report, mid-market companies spend an average of 4.3% of revenue on technology. Getting this decision wrong—either way—can waste significant budget and years of operational progress.

Here's a framework for making this decision with confidence.

The Core Question: Is This Process Your Competitive Advantage?

Before evaluating vendors or development costs, answer this:

Does this process differentiate you from competitors?

• If yes → lean toward building custom
• If no → lean toward buying off-the-shelf

Why? Because off-the-shelf software, by definition, is available to everyone—including your competitors. If your order processing works exactly like every other distributor's, that's fine. If your client onboarding is what wins you business, making it identical to competitors is a strategic mistake.

The Hidden Costs of Buying (That Vendors Don't Mention)

Off-the-shelf software looks cheap at first glance. Monthly subscriptions seem manageable. But the true cost includes much more:

1. Customization Costs

Most "out of the box" solutions require significant configuration. According to a 2023 Forrester study, the average SaaS implementation costs 2-3x the annual subscription in professional services during the first year.

2. Process Adaptation Costs

When software doesn't fit your process, you have two choices: customize the software (expensive) or change your process (disruptive).

The hidden tax:

• Staff workarounds that consume time
• Reduced efficiency from process changes
• Lost competitive advantages you designed into your workflows

3. Integration Costs

Standard software rarely integrates perfectly with your existing tools. Connecting systems requires:

• API development or middleware (€5,000-€20,000)
• Ongoing maintenance as systems update
• Data synchronization management

4. Vendor Lock-in Costs

Once your data and processes live in a vendor's system:

• Migration becomes expensive and risky
• Price increases are hard to resist
• Feature changes are outside your control
• Vendor acquisition or shutdown creates business risk

5. Feature Bloat Tax

You pay for capabilities you don't need. Enterprise software is priced for large organizations with complex requirements. If you use 20% of features, you're subsidizing the other 80%.

The Hidden Costs of Building (That Developers Don't Mention)

Custom software has its own hidden costs that optimistic project plans often overlook:

1. Specification Costs

Before writing code, someone must define exactly what to build. This discovery phase typically costs 10-15% of total project budget—and skipping it is the #1 cause of project failure.

2. Scope Creep Costs

According to the Project Management Institute, 52% of software projects experience scope creep. "While we're at it, can we also..." adds 20-50% to most custom projects.

3. Maintenance Costs

Software is never "done." Budget 15-20% of initial development cost annually for:

• Bug fixes and security updates
• Adapting to browser/OS changes
• Minor enhancements and adjustments
• Server and infrastructure costs

4. Knowledge Dependency Costs

If one person understands your custom system, you have a critical business risk. Documentation, training, and redundancy add to costs but are essential.

5. Opportunity Costs

Time spent building is time not spent on core business. Custom development typically takes 3-6 months for meaningful systems. During that time, your competitors using off-the-shelf solutions are already operating.

The Decision Matrix: 7 Criteria That Matter

Score each criterion from 1-5, then total your results:

Scoring Interpretation

The Hybrid Approach: Often the Best Answer

For most mid-market businesses, the answer isn't purely build or buy—it's strategic combination:

Buy for:

• Accounting and financial management (QuickBooks, Xero, Holded)
• Email and communication (Google Workspace, Microsoft 365)
• Basic CRM (HubSpot, Pipedrive)
• Standard HR functions (Factorial, Personio)

Build for:

• Customer-facing portals and experiences
• Operational workflows unique to your business
• Integrations connecting your bought systems
• Dashboards and reporting specific to your KPIs

The Integration Layer

Often, the highest-value custom development isn't a complete system—it's the layer that connects your off-the-shelf tools and adds your unique business logic.

Real-World Decision Examples

Example 1: The Distributor's Order System

Example 2: The Consulting Firm's Project Management

Example 3: The Clinic's Patient Journey

Key Takeaways

• The build vs. buy decision hinges on whether the process is competitively differentiating
• Off-the-shelf true costs are typically 3-5x the visible subscription price
• Custom development requires 15-20% annual maintenance budget
• Most businesses benefit from a hybrid approach: buy standard, build differentiating
• Score your specific situation against the 7 criteria before deciding
• The integration layer is often the highest-value custom development

Next Steps

Not sure whether to build or buy for your specific situation? We help businesses evaluate their options and make technology decisions that support long-term growth—not just short-term convenience.