Which Software Solution Is Best for Your Business? Here's How to Decide. SaaS vs. custom software development: Which is the safest bet for you?
By Bogdan Nicoara Edited by Chelsea Brown
Opinions expressed by Entrepreneur contributors are their own.
The global SaaS market is estimated to reach $702.19 billion by 2030. It is undoubtedly a growing market that proves its benefits. Nonetheless, there are companies — and actually, entire industries — that are still reluctant when it comes to adopting a SaaS solution. Bespoke (or custom) developments have been believed to be the safest bet, but is it the case anymore?
As a proptech company offering a SaaS product that digitalizes the real estate industry, we've seen both enthusiasm and skepticism regarding this business model, so I decided to get into more detail about the advantages and disadvantages of both SaaS and bespoke technologies.
Related: 4 Ways SaaS Can Make Entrepreneurs More Efficient and Competitive
Advantages of SaaS
Efforts and budgets associated with SaaS product upgrades are lower, as providers grow continuously based on "community intelligence." The product or service goes through constant improvement based on feedback and suggestions from multiple users that might have faced the same problem as you. This transforms SaaS products into live organisms that are very flexible and dynamic.
Staying on the cost topic, it's important to mention that SaaS acquisition is financially more productive, as the cost belongs to the OpEx category (short-term costs), whereas custom developments usually go under the CapEx category (long-term investments).
Using a SaaS solution equals faster deployment, and it is the way to go for agile processes. Companies with a testing mentality will see the advantage in starting to use a new product and measure its impact sooner rather than later. Being an early adopter that understands the dynamic environment and changing needs of stakeholders puts a company on the fast track to success.
It's also worth noting that a SaaS service or product is often modular, which means that you can opt and test for parts of it that help you the most in your processes. Providers will even have multiple offerings, based on your needs, usage or company size.
Disadvantages of SaaS
According to McKinsey research, most large companies don't trust SaaS providers with their security keys and prefer to hold them on-premises. But on-premise tends to become less and less an optimal solution, leaving room for private cloud, which can also be offered by SaaS companies.
It seems like the main disadvantages that most potential clients see are related to security and ownership. Many perceive a SaaS as an external solution that isn't as trustworthy as something they develop according to their own specific needs and not as an enhancement to their own capabilities.
Another disadvantage of SaaS is that customization isn't as on-point as with bespoke solutions. Some SaaS solutions do offer a certain level of customization but not to the degree that it will perfectly reflect a company's brand, identity and values.
SaaS solutions come with challenges on the legal side as well. Companies adopting a SaaS product most frequently have to accept that any potential legal action will have to fall under the SaaS provider's national law and not their own.
Related: What Makes SaaS the Go-to Option to Build a Digital Ecosystem?
Advantages of custom development
Probably one of the biggest advantages of custom software is that you get exactly what you want and need, you own the IP, and there are fewer security risks.
You get to digitalize exactly the processes you want to, with little disruption among your team. This does require a company to deeply understand current and potential upcoming challenges and opportunities in the market and respond to them through state-of-the-art solutions.
Custom-developed software could be the way to go when looking to optimize a very specific process that you know and that doesn't change too often.
Disadvantages of custom solutions
Building your own custom solution takes time and considerate budgets. Research shows that "less than 10% of developers can deliver a typical software solution with basic features in less than 2 months," not to mention the cost of failure, which "typically affects 30% to 70% of enterprise development projects."
Once you do have it — probably later rather than sooner — the needs of the organizations might have changed, putting you in a situation where you've spent a lot of time and money on a product that no one will use (it is said that "most people use only 10% of a product feature at best," a concerning percentage for a bespoke development).
Furthermore, one of the advantages of custom solutions — building something specifically addressing your needs — can quickly become a disadvantage if that need hasn't been properly mapped or if it tries to solve too many specific problems for too many people.
Building a product without having as much market knowledge as a SaaS company comes with other challenges as well: It's not that flexible and dynamic, it can block your agility, and you have to pay for each and every update — not to mention that there is a high possibility that the team that developed the custom solution will change, which means there will be a learning curve for any new developer who has to maintain and update the bespoke solution.
Related: Before Investing in Custom Software, Answer These 4 Questions
A change of mentality
Custom-built software can very well complement SaaS software, bringing that element of deep personalization. By integrating them, one can get the best of both worlds: agile, state-of-the-art technology and custom, identity-based solutions for their highly specific needs.
It is only fair for each company to want to stand out, but we need a shift in perspective: Stop praising custom developments for the sake of ownership. After all, it's not owning your own software that will send you to the top but rather your understanding of how you can best meet your clients' expectations. SaaS solutions are the fuel that accelerates your rapid growth.
