BIZOMAT Tools · Business

Build or Buy Software

Should you build custom software or buy an existing product?

Compares total cost of ownership of custom software and a package, with fit and uniqueness ratings.

Open the calculatorRuns in your browser. No account needed.

How this tool works

Inputs, units and where to find them

InputUnitTypical source
Custom build cost$Quoted custom build cost
Custom annual support$Annual support, hosting and maintenance of custom software
Package setup cost$Package implementation and set-up cost
Package monthly cost$Package subscription per month
Comparison periodyearsComparison period
Off-the-shelf fit1–5 scoreRating of how well the package fits your process (tested with real scenarios)
Uniqueness of requirement1–5 scoreRating of how unique your requirement is
Need for control1–5 scoreRating of how much control you need over the system

What each input means

Open an input to see what it is, its units, the worked example and the common mistakes, with a small diagram.

What this means: Custom build cost
Illustration: Custom build costA stack of coins and a note representing the money amount Custom build cost.$Example: $50000Custom build cost
What it is
The one-off cost to design, build, test and deploy custom software, from a developer’s quotation or estimate.
Units and format
Enter a number in $: an amount of money; use one currency for every money input. The form accepts $0 or more.
Example
The form opens with $50000 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Adds directly to custom total cost of ownership.
Get it right
Include testing, data migration and project management, which are often outside the build quote.
What this means: Custom annual support
Illustration: Custom annual supportA stack of coins and a note representing the money amount Custom annual support.$Example: $5000Custom annual support
What it is
The yearly cost of running custom software after launch: hosting, support, bug fixes, security updates and small changes.
Units and format
Enter a number in $: an amount of money; use one currency for every money input. The form accepts $0 or more.
Example
The form opens with $5000 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Multiplied by the comparison years and added to custom total cost.
Get it right
Custom software always needs ongoing maintenance; do not leave this at 0.
What this means: Package setup cost
Illustration: Package setup costA stack of coins and a note representing the money amount Package setup cost.$Example: $5000Package setup cost
What it is
The one-off cost to implement an off-the-shelf package: configuration, integration, data migration and training.
Units and format
Enter a number in $: an amount of money; use one currency for every money input. The form accepts $0 or more.
Example
The form opens with $5000 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Adds directly to package total cost.
Get it right
Ask the vendor or implementer for a fixed implementation quote.
What this means: Package monthly cost
Illustration: Package monthly costA stack of coins and a note representing the money amount Package monthly cost.$Example: $1500Package monthly cost
What it is
The monthly subscription or licence fee for the package for all the users you need.
Units and format
Enter a number in $: an amount of money; use one currency for every money input. The form accepts $0 or more.
Example
The form opens with $1500 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Multiplied by 12 × comparison years and added to package total cost.
Get it right
Check how the price grows with users and modules, and whether yearly increases apply.
What this means: Comparison period
Illustration: Comparison periodA timeline from a start mark to an end mark; Comparison period is the time between them.startendtExample: 3 yearsComparison period
What it is
The number of years over which the two options’ costs are added up, for example the expected life of the system.
Units and format
Enter a number in years: years. The form accepts 1 years to 10 years.
Example
The form opens with 3 years as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
More years add more support or subscription cost to each option.
Get it right
The comparison is not discounted, so longer periods weight ongoing costs fully.
What this means: Off-the-shelf fit
Illustration: Off-the-shelf fitA scale from the lowest to the highest score with a marker at the chosen score for Off-the-shelf fit. The marker follows the slider.15lowhighExample: 3Off-the-shelf fit
What it is
How well an off-the-shelf package meets your process, tested with real scenarios, rated 1 (poor fit) to 5 (fits with little change).
Units and format
Move the slider to a score from 1 (low) to 5 (high).
Example
The form opens with 3 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
A fit of 4 or more gives BUY; 3 or less is needed for BUILD.
Get it right
Rate it after a demonstration using your own scenarios, not from the brochure.
What this means: Uniqueness of requirement
Illustration: Uniqueness of requirementA scale from the lowest to the highest score with a marker at the chosen score for Uniqueness of requirement. The marker follows the slider.15lowhighExample: 4Uniqueness of requirement
What it is
How unusual your requirement is compared with what most organisations need, rated 1 (common) to 5 (unique to you).
Units and format
Move the slider to a score from 1 (low) to 5 (high).
Example
The form opens with 4 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Averaged with need for control; an average of 4 or more is needed for BUILD.
Get it right
Ask whether the uniqueness gives a real advantage or is just habit.
What this means: Need for control
Illustration: Need for controlA scale from the lowest to the highest score with a marker at the chosen score for Need for control. The marker follows the slider.15lowhighExample: 4Need for control
What it is
How much you need to control the system’s features, roadmap, data and hosting yourself, rated 1 (little) to 5 (full control).
Units and format
Move the slider to a score from 1 (low) to 5 (high).
Example
The form opens with 4 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Averaged with uniqueness; an average of 4 or more is needed for BUILD.
Get it right
Consider regulatory, security and integration needs, not only preference.

Method and formulas

  1. Custom TCO = build + annual support × years
  2. Package TCO = set-up + monthly × 12 × years
  3. BUILD if need ≥ 4, fit ≤ 3 and custom TCO ≤ 1.5 × package; BUY if fit ≥ 4

Limitations

  • Undiscounted; delivery risk of custom builds is not priced

Typical uses

  • System selection
  • Custom development proposals

Who it is for

  • Owners and managers
  • IT and operations leads

What you get

  • BUILD, BUY or COMPARE IN DETAIL
  • TCO of each option

Interpreting the result

  • A fit-gap analysis is needed whenever the result is COMPARE IN DETAIL

BIZOMAT tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.

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