SaaS vs. Custom Software – Which is best for your business?

As per the projected analysis for the SaaS market post-pandemic, the global SaaS market size is expected to increase from $148.75 billion in 2021 to approximately $702.19 billion by 2030, indicating a Compound Annual Growth Rate (CAGR) of 18.82%. It is undoubtedly an impressive statistic. But wait till you read this next one.

The global custom software development market reached a valuation of USD 24.46 billion in 2021, with an anticipated compound annual growth rate (CAGR) of 22.3% from 2022 to 2030, indicating significant expansion. If you are trying to parse out which one will suit your business- Custom Software or SaaS, these statistics would have been of little help. Because clearly, all of these facts and figures really do make this a delightful dilemma where both options are so good that it becomes challenging to determine which one is better.

Hence, in this brief post, we are breaking down both SaaS and custom software to their bare-bones concepts. Hopefully, by the end of this post, you will be able to have a concrete understanding of the pros and cons of each of these software offerings. It would help you decide whether you should hire a SaaS application development company or seek out custom software development services. Let’s start by understanding these concepts and how they impact a business.

What Is SaaS?

SaaS is a software distribution model where applications are hosted and maintained by a service provider. With SaaS, a business can access software over the internet via web browsers. SaaS offers a subscription-based approach. It provides a business, or any user for that matter, access to software without the need for upfront investments in infrastructure and licenses. SaaS has some defining characteristics, which are discussed below:

• Multi-tenancy: The SaaS model works by sharing the same infrastructure among multiple users. Essentially, a single instance of the software application serves multiple customers (tenants) simultaneously. However, take note that each tenant’s data and configuration are isolated and secured to ensure data privacy and security.

• Automatic Updates: SaaS service provider manages and deploys software updates seamlessly without any intervention from users. This ensures that customers always have access to the latest features, bug fixes, and security enhancements.

• Scalability: Scalability is undoubtedly a characteristic of SaaS. The infrastructure can accommodate varying levels of user demand and workloads. As a result, SaaS providers can easily scale up or down resources based on customer needs, allowing businesses to adapt to changing requirements.

• Accessibility and Convenience: SaaS applications are accessible over the internet through web browsers, providing users with the convenience of accessing the software from anywhere with an internet connection. This accessibility enhances collaboration and productivity for distributed teams.

• Cost-Effectiveness: SaaS is cost-effective as businesses can avoid large upfront investments in hardware, software licenses, and infrastructure. SaaS operates on a subscription-based model, enabling predictable monthly or annual expenses.

• Time-to-Value: SaaS solutions offer quick implementation and deployment, leading to faster time-to-value for businesses. As a business owner, you can start using the software almost immediately after signing up, which is advantageous for time-sensitive projects.

What Is Custom Software?

Custom software is a tailored software application that is designed and developed to address specific business needs and requirements. Also known as bespoke applications, custom software is crafted with the sole purpose of aligning with a particular organization’s unique processes and workflows. Custom software is built from scratch, allowing developers to create code, architecture, and features tailored to the business’s precise specifications. The following are the defining characteristics of Custom software:

• Unique Features and Functionalities: Custom software offers the advantage of having distinct and innovative features that cater exclusively to the business’s requirements.

• Precise Alignment with Business Processes: As a business owner, you can tailor custom software to integrate functionalities that would specifically help streamline your existing workflows and processes. Custom software is designed to precisely match the organization’s existing workflows, eliminating the need for businesses to adjust their processes to fit pre-existing software. This alignment enhances operational efficiency and productivity.

• Flexibility and Scalability: Custom software is flexible, which allows businesses to modify and extend the software as their needs evolve over time. Customized software can be scaled to accommodate business growth without compromising performance.

• Control Over Customization: In the case of bespoke software, you will have full control over its customization. As a business, you will have the authority to include the features you want. Not only that, you will be able to have control over how the user interface should be designed and how the software should interact with other systems.

• Integration with Existing Infrastructure: Custom software can be seamlessly integrated with the organization’s existing infrastructure and technologies. This integration streamlines data exchange and enhances overall operational efficiency.

• Long-Term Cost-Effectiveness: Custom software can lead to long-term cost savings, as businesses are not bound by recurring subscription fees or licenses. The initial investment in custom software can prove cost-effective over time, especially for businesses with specific needs that standard software might not fulfill entirely.

SaaS vs. Custom Software: A Comparative Analysis

1. Scalability:

SaaS offers high scalability due to its multi-tenancy architecture. In a SaaS model, resources can be dynamically allocated to accommodate varying user demands. Custom software can also be scaled. Custom software can be built keeping both the current as well as future needs of a business into account. In that sense, custom software is amazing at supporting the future growth and expansion of a business.

However, scalability in custom software may require additional development efforts and infrastructure investments. Hence, it makes much more sense for established businesses to choose custom software. On the other hand, for businesses that are just starting out or small in size, custom software can be quite an investment at the outset. Hence, in comparison, SaaS is much more straightforward and, therefore, preferable when it comes to scalability. 

2. Cost:

Cost is a major factor for any business to consider. However, depending on whether a business is well-established or is at a beginning stage, the cost can be viewed through different lenses. For a starter or small business, SaaS provides a major cost advantage. Small businesses can benefit immensely from a pay-as-you-go model. With SaaS, businesses can avoid upfront expenses for hardware, software, and maintenance.

On the other hand, for bigger, well-established enterprises, bearing costs upfront may not be that much of a problem as long as they are able to save costs over the long haul. That is why businesses operating on a large scale can benefit a lot more from custom software. With bespoke software that is tailored to cater to their specific business needs and workflows, businesses can save considerably on costs that pile up over time, such as software maintenance costs, software licensing fees, software upgrade costs, software updates costs, and many other such expenses.

3. Development Time:

SaaS applications are readily available. It is because they are pre-built and hosted by service providers. As a result, implementation and deployment of SaaS takes a lot less time than custom software. Building custom software takes much longer because it is built from the ground up. The process of building custom software involves comprehensive planning, design, development, and testing. Hence, in terms of development time, SaaS is a better alternative to reduce time-to-market.

However, one must keep in mind that, in many cases, an organization is in dire need of custom software that can serve its specific needs. In that case, using a SaaS solution, even though it’s a quick fix in the short term, can prove time-consuming in the long run. It means that if you are forced to constantly spend money and time on updates and upgrades because that is what it takes to keep the application useful in your business context, then it might be worth it to spend some time on building custom software. The point is that there is no cookie-cutter way of getting the best solution for your business. Sometimes, more development time can mean less investment of time and money down the line.

4. Maintenance:

SaaS providers handle maintenance tasks. It includes updates, security, and bug fixes. Hence, a business that is using SaaS is essentially relieved of these responsibilities. On the other hand, custom software does require maintenance and support. A business that chooses to go with custom software would have to hire a development team that is reliable and trustworthy. However, if a reputed custom software development firm can be brought on board, then maintaining software is not that difficult of a task to manage. But if you look at it purely from a maintenance point of view, clearly, SaaS has an edge over custom software.

5. User Experience:

SaaS applications, most of the time, provide a consistent user experience across devices and platforms. It is because SaaS applications are designed to be accessible through web browsers. However, apart from being accessible, there is not much that SaaS brings to the table when it comes to user experience.

On the other hand, user experience is the domain where custom software shines the most. Custom software allows businesses to tailor the user experience precisely to their needs. As a result, users are able to get a much more personalized and intuitive interface. Hence, when it comes to delivering a stellar user experience, custom software is the clear winner over SaaS.

It is fair to conclude from the above that in some cases, SaaS has the upper hand, while in others, Custom Software appears to be the winning alternative. Hence, businesses should pick based on what is most important for them. Is it saving time or saving costs? Is it to achieve scalability or to deliver a stellar user experience? Answers to these questions will determine whether a business should pick SaaS or go with custom software.

 In order to answer the above questions, a business owner needs to have a solid understanding of their needs. Let’s unpack what it means to have an understanding of one’s business needs.

Importance of Understanding Business Needs

Before choosing between SaaS or custom software, it is paramount for you to have an understanding of the needs of your business. Not only that, you should be able to prioritize those needs so as to have a grasp on what’s most important and what’s the least important thing.

You cannot attain a certain level of development quality unless you are sure about the features and functionalities that you are trying to incorporate into your solution. Every business has unique processes, workflows, and challenges. To put it simply, the needs of every business are different. Hence, no universal prescription can be rolled out that would state which choice would be better for all businesses- SaaS or Custom Software. This is a decision that would differ from business to business.

Every business needs a different software that would cater to its specific requirements. Hence, it is important for you as a business owner to have a strong grasp of your business’s core requirements.

Conclusion

In conclusion, the decision between SaaS and custom software is not a one-size-fits-all approach. Each option has its own set of advantages and considerations that businesses must weigh based on their unique needs and priorities.

SaaS offers quick implementation, scalability, and cost-effectiveness, making it an attractive choice for startups and small businesses looking for a straightforward solution. On the other hand, custom software excels in providing personalized features, precise alignment with business processes, and superior user experiences, making it a preferred option for established enterprises seeking long-term cost savings and tailored solutions.

Understanding your business needs and priorities is paramount in making the right choice. Take the time to evaluate your specific requirements, consider future growth prospects, and prioritize features that will most impact your business success.

As you weigh the options, keep in mind that no matter which path you choose, the success of your software development journey depends on collaboration with a reputable and experienced development partner. Whether you opt for SaaS or custom software, partnering with a reliable software development company can ensure a smooth and successful implementation.

In the end, your software solution should align with your business goals and foster growth while enhancing customer experiences. So, take the plunge, armed with your newfound knowledge, and embark on a software development journey that empowers your business for future success.

Have questions or need further guidance? We’re here to help! Feel free to share your thoughts or ask any questions. Let’s continue this discussion together, and may your software journey be transformative and rewarding!