How to read the result
The calculator adds up what each option costs over the years you choose and discounts each year back to today. Off-the-shelf is the one-time setup plus the subscription for every user, every month. Custom is the build plus a yearly upkeep figure. The option with the lower total costs less.
The break-even line is the number of users at which both cost the same. Below it, renting per seat is cheaper. Above it, building your own is cheaper, because its cost hardly grows with each extra user.
A worked example
Twenty-five people use a tool that costs $60 per user per month, with $5,000 to set it up. Building your own would cost $75,000, plus 20% of that each year to keep it running. Over 3 years at a 10% discount rate, the subscription costs about $49,800 in today's money and custom about $112,300. Off-the-shelf wins at 25 users, and custom only becomes cheaper from about 60 users. Change any number above and the result follows.
What the numbers leave out
Cost is not the whole decision. Before you commit, weigh what the calculator cannot see:
- Time to start. A subscription works this week. A custom build takes weeks or months, and the cost of waiting can be larger than the price difference.
- Fit. If your process is your advantage, a tool that forces you into its process has a cost the invoice does not show.
- Price changes. Vendors raise per-seat prices, and moving off a tool later has its own cost.
- Ownership and risk. Custom software is yours, including the bugs, the security and the person who knows how it works.
About the upkeep figure
Many agencies say custom software costs 15 to 25 percent of the build cost each year to maintain. We looked for the original source of that range and did not find one, so treat it as a rule of thumb, not a fact. The calculator starts at 20 percent. Your developer's estimate, or your own past invoices, will be more accurate.
Related
Comparing building with buying a one-off tool rather than seats? Use the build vs buy calculator. For the full decision, read the build, buy or rent framework.