Adopting SaaS vs. Custom Software Development: Everything Founders Need to Know Before Building

Frustrated with SaaS tools that don’t quite fit your workflows? Wondering if building a custom solution might be the better path? For SaaS founders and startup leaders, the decision between adopting existing SaaS products or investing in custom-built software can shape speed-to-market, scalability, and even investor confidence.

In this guide, we’ll discuss the pros and cons of adopting SaaS vs. custom software development. By the end, you’ll have the clarity to choose the right path for your product’s growth.

Table of Contents

What Is SaaS?

• How SaaS Works
• Pros of SaaS Applications
• Cons of SaaS Applications

What Is Custom Software Development?

• How Custom Software Works
• Pros of Custom Software
• Cons of Custom Software

Key Factors to Consider When Choosing

• What Are Your Business Needs?
• Do You Have the Budget for What You Need?
• How Critical Is Control Over Software and Data?
• What Is Your Long-Term Vision?

Comparison Table: SaaS vs. Custom Software vs. Hybrid

Hybrid Approaches: Blending SaaS and Custom Development

How Designli Helps You Make the Right Choice

• Impact Week: Identifying Risks and Opportunities
• SolutionLab: Prototyping and Roadmap Planning
• Designli Engine: Building for Scalability

FAQs

Conclusion

What is SaaS?

Software as a service (SaaS) is a specific type of software delivered over the internet, usually through a subscription model. SaaS solutions offer an alternative to “on-premise” systems, which require installation on physical servers. Instead, SaaS applications are hosted in the cloud and accessed through a browser or app.  Common examples include email, calendars, and project management tools. 

Most SaaS tools follow a subscription-based model. Where businesses pay monthly or annually to “rent” the software for a limited period of time. Pricing often scales based on usage or number of users, which makes SaaS affordable upfront but potentially expensive as your team grows.

There are two main types of structure for SaaS products: single-tenant and multi-tenant architecture. 

• Single-tenant: A dedicated instance of the software for one customer, offering more control but higher costs.
• Multi-tenant: Multiple customers share the same infrastructure, with updates and maintenance managed by the vendor. This is the most common model, offering lower costs and faster improvements.

What are the Pros of SaaS?

SaaS products are one of the most popular ways businesses access high-quality software today. For many startups and growing companies, a SaaS application can provide an ideal, quick, flexible, and cost-effective solution.

Key advantages include:

Fast Deployment

SaaS products are commonly described as an “off-the-shelf” or “plug-and-play” solution. This eliminates the lengthy development timelines of custom software and lets teams start using the product right away.

Cost-Effective (at first)

SaaS lowers the barrier to entry with a smaller upfront investment compared to building custom software. For early-stage companies or small teams, subscription pricing is often more budget-friendly, especially if you only need a handful of licenses.

Easy Maintenance

Maintenance for SaaS applications is practically effortless. The SaaS provider pushes updates and upgrades to users as needed. So, there’s no need for costly re-installations or on-site IT support. Upgrades are included in subscription fees and are essentially subsidized by other users. 

Built-in Scalability 

A SaaS application is designed to grow with your business. You don’t have to worry about your team outgrowing software designed for a smaller team. Likewise, you can scale back your subscription if you no longer need as much access as you once did.

What are the Cons of SaaS?

While a SaaS application offers speed and affordability, there are trade-offs to consider, especially if you’re planning for long-term growth. Common drawbacks include:

Limited Customization

SaaS applications are built for broad use cases, which means features are standardized. This makes them quick to adopt, but harder to tailor. If your workflows or customer needs are highly unique, a SaaS product may not align perfectly.

Vendor Lock-in

Once you establish your data and users with a particular SaaS solution, migration to a different application can be complex and costly. Extracting data from an application and transferring it to another is often complicated and time-consuming due to the workflow within each tool. In addition, training staff to adopt the new system can require significant time and resources. The hassle of switching often keeps companies locked in with one vendor, even if prices increase.

Security & Compliance Risk

With SaaS, you rely on the provider’s security protocols. While this isn’t a problem for all companies, it poses an issue for some businesses in regulated industries, such as finance and healthcare. You might face compliance issues by using a SaaS product with insufficient security protocols.

Long-Term Costs

While SaaS applications offer the benefit of low upfront costs, they can be costly in the long term. Recurring subscription fees can accumulate over time especially if your business experiences growth. User-based fees can become very expensive to maintain.

What is Custom Software Development?

Custom software is a digital solution built specifically for one company’s needs. Unlike a SaaS application, which serves many users with standardized features, custom software is designed around a single set of requirements, workflows, and goals.

Instead of multi-tenant architecture, custom-built applications are single-tenant by default, meaning your business owns the software, data, and infrastructure. This gives you full control over functionality, integrations, and long-term scalability.

Pros of Custom Software Dev

For many businesses, the advantages of building a custom tool outweigh the convenience of SaaS applications.

Full Customization

One of the most compelling reasons to choose custom software is the ability to tailor the tool to your needs. Instead of forcing an “off-the-shelf” feature to work, you get functionality that aligns perfectly with your business's operations.

Unique Competitive Edge

Custom software offers the ability to create something totally unique. With a SaaS product, users have access to the same toolset. Custom-built solutions give you the potential to develop innovative software features, giving your product a potential market advantage and differentiation.

Ownership & Control

When you build a tool from the ground up, you retain full control over the software, its data, and integrations. You don’t have to worry about a third-party SaaS provider using your information, and you can ensure your software is interoperable with the other programs you need. 

Potential Long-Term Cost Savings

Building custom software is an investment, but often you’ll save money in the long run. Custom-built software eliminates recurring subscription fees. Over time, maintenance costs are often lower than the accumulated expense of scaling with SaaS.

Learn more: How to Calculate the ROI for Custom Software

What are the Cons of Custom Software?

Before you choose the custom software route, be aware of a few drawbacks to this approach. Still, depending on your business and goals, the pros might outweigh the cons. 

Higher Upfront Cost

Custom software requires an upfront cost typically higher than you would pay for access to a SaaS solution. That’s because custom solutions require an initial investment in development. You’ll often need to fund design, development, and testing with a dedicated development team. 

Longer Time to Market

If you want to build a custom software solution, you’ll need to plan for in-process time. Development and deployment for custom software take longer than for a SaaS implementation. This can delay your ability to solve immediate business needs.

Learn more: How Long Does It Take to Build a Custom Application

Ongoing Maintenance Responsibility

With SaaS, vendors manage updates and fixes. With custom software, your business owns that responsibility. You’ll need in-house or outsourced developers to handle maintenance, upgrades, and bug fixes as your product evolves.

Key Factors to Consider When Deciding Between Adopting SaaS vs Custom Software Development

SaaS applications and custom-built software have their place. Consider these key factors to determine which approach is right for your business. Here are the main factors to weigh:

What Are Your Business Needs?

Before you opt for a custom software solution, consider the following: How unique are your business processes? If your processes and goals are relatively similar to those of other businesses, SaaS features will likely work. But a custom solution could be worth the investment if your processes are highly unique or central to your competitive edge.

Learn more: Is Custom Software Development Right for Your Business?

Do You Have the Budget?

SaaS requires a lower upfront investment, while custom software demands more capital. Consider whether the long-term savings of owning your system outweigh the predictability of ongoing subscription fees.

Learn more: Build vs. Buy: Which is Right for Your Business?

How Important is Control and Security?

In some industries and for some companies, control and security are absolutely paramount. In high-risk industries, like aviation and healthcare, giving up some oversight to a vendor is simply too risky. For others, less control is not a huge issue. 

What is Your Long-Term Business Vision?

Think beyond immediate needs. If you expect significant growth, custom software may provide the flexibility and scalability you’ll need later. If you anticipate frequent changes or pivots, a SaaS application could give you more flexibility to adjust.

Learn more: Key Questions to Ask When Planning to Buy Custom Software

Here's a quick comparison table between SaaS and custom software:

SaaS + Custom: When a Hybrid Approach Makes Sense

Not every decision involves choosing between SaaS and custom software. Many startups and growing companies benefit from a hybrid approach, using SaaS as a foundation while extending it with custom features or integrations.

Why Hybrid Works

• Speed + Customization: Launch quickly with a SaaS application, then layer in custom development to cover unique workflows.
• Cost Balance: Keep upfront costs manageable while avoiding vendor limitations long term.
• Scalability: Adapt as your business grows, using SaaS where it’s efficient and custom code where differentiation matters.
  

For SaaS founders, this often means validating your product idea with existing tools, then investing in custom development once traction and funding are in place. In SolutionLab, we often help founders identify where a hybrid approach makes sense, maximizing speed without sacrificing scalability.

The Strategic Decision: SaaS vs. Custom Software

There’s no one-size-fits-all answer when choosing between SaaS and custom software. Both approaches have clear advantages and trade-offs. For some teams, an existing SaaS tool is the fastest way to get moving. For others, building a custom solution creates the flexibility and control needed to scale.

The right choice depends on your business needs, budget, and long-term vision. In many cases, the decision isn’t strictly one or the other; a hybrid approach, where SaaS tools are extended or combined with custom features, can deliver the best of both worlds.

At Designli, we help SaaS founders navigate these trade-offs through SolutionLab, where we map business goals, evaluate options, and provide a clear product roadmap before any code is written. Whether SaaS, custom, or a hybrid model is right for you, our goal is to ensure you choose the path that supports sustainable growth. 

Ready to find the right fit for your business? Schedule a free consultation to get started. You might also like:

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