What is Build vs Buy Cost Comparison?
A build vs buy analysis compares the total cost of building custom software internally against purchasing an existing solution over 3-5 years.
The Formula
TCO Build = (Dev Salaries × Months) + Infrastructure + Maintenance TCO Buy = (License × Years) + Implementation + Customization
Worked Example
A company needs a CRM: building requires 3 developers for 6 months; buying costs $50,000/year with $20,000 implementation.
- Build cost: 3 × $8,000/month × 6 = $144,000 + $10,000 infra = $154,000 Year 1
- Build ongoing: $30,000/year maintenance (Years 2-3) = $60,000
- Buy cost: $50,000 × 3 years + $20,000 setup = $170,000
- Build 3-year TCO: $214,000 vs Buy 3-year TCO: $170,000
📌 Buying saves $44,000 over 3 years. Building only makes sense if requirements are truly unique.
Why This Matters
Resource allocation
Development time spent building commodity software is time not spent on your core product differentiation.
Time to market
Buying gets you live in weeks versus months of development. Speed often outweighs customization benefits.
Maintenance burden
Custom software requires ongoing maintenance costing 15-20% of build cost annually, a commitment many teams underestimate.
Common Mistakes
❌ Underestimating build time
Software projects take 2-3x longer than estimated. A 3-month project typically takes 6-9 months in reality.
❌ Ignoring opportunity cost
Developers building internal tools are not building your product. The opportunity cost often exceeds the direct cost.
❌ Not accounting for ongoing maintenance
Building is not a one-time cost. Security patches, updates, and bug fixes consume 20%+ of ongoing developer time.
Industry Benchmarks
| Category | Good | Average | Poor |
|---|---|---|---|
| Standard Business Tools | Buy (save 40%+) | Similar cost | Build costs 2x+ |
| Industry-Specific | Build (unique advantage) | Customize existing | Build commodity features |
| Core Product Features | Build (differentiation) | Hybrid approach | Buy and lose advantage |
Source: Gartner Build vs Buy Decision Framework 2025
Benchmark data sourced from Gartner Build vs Buy Decision Framework 2025.