Replace SaaS With Custom Software: When Renting Stops Making Sense
By Aldridge Dagos, operations software engineer
Every year the software bill goes up and you did not add a thing. Same tools, same team, more money. You are paying rent on the systems your business runs on, the price climbs on the vendor’s schedule instead of yours, and the day you stop paying, the tools stop working and the data stops being yours. At some point renting SaaS stops making sense and owning custom software starts. This is how to find that point.
I build companies their own custom software to replace the SaaS they rent, so I have run this math many times. It is not a slogan about ownership. It is a break-even, and it turns on two numbers most teams never look at: what a tool actually costs per person, and how fast that cost climbs. Get those two, and the decision makes itself.
The short version: Industry reports estimate substantial SaaS spend and unused licenses, but those portfolio averages do not decide whether one tool should be replaced. Compare the full cost of the current service with design, build, migration, hosting, security, support, maintenance, compliance, and opportunity cost. In the worked example below, custom software breaks even during year three because of the chosen seat count, build price, maintenance allowance, and assumed SaaS increase. A real project may break even earlier, later, or never. Build only when the workflow is stable, strategically important, and expensive enough to justify long-term ownership.
How much do companies spend on SaaS per employee?
Start with the number, because most teams do not know it. The average company spends about $9,200 per employee a year on SaaS, by Vertice’s count, built on more than $30 billion of real procurement spend. Zylo’s 2026 SaaS Management Index, drawn from 40 million licenses, puts the median at $9,455 per employee. Two different datasets landing near the same place, and the place is high.
It is spread across more tools than anyone realizes. Zylo finds the average company runs 275 applications, and large enterprises run 660. You are not paying for one system. You are paying for hundreds, many of them overlapping, and about 36 percent of the licenses sit unused. A third of the bill buys nothing. That is the money the ownership question is really about.
Why do SaaS prices keep going up?
Renting has a property that quietly wrecks the long-term math: the price is not yours to set, and it climbs. SaaS prices rose about 13 percent in 2026 by Vertice’s index, and peaked near 14.7 percent late in 2025, close to five times G7 inflation. Back in 2023 the gap was already stark, 8.7 percent SaaS price growth against 3.2 percent consumer inflation, and nearly three quarters of vendors raised prices that year.
You feel this as renewals that creep up for no new value, seats that cost more than they did last year, and features you relied on moved into a higher tier. The subscription you signed is a floor, not a ceiling. By 2023, software had already grown to one dollar of every seven a company spends, and the trend line points one way.
The math: when to replace SaaS with custom software
Custom software shifts cost toward design, implementation, migration, and internal ownership. Ongoing expense is not automatically flat. Hosting, security work, support volume, regulatory change, feature requests, and technical debt can raise it. Some planning guides use 15 to 25 percent of build cost as a maintenance allowance, but that is an input to test, not an industry guarantee.
Put real numbers on it. Say 40 people use a tool at $75 a seat a month, $36,000 a year, and the price climbs 13 percent a year like the rest of SaaS. Building the equivalent in-house costs $70,000 once, then $14,000 a year to maintain. Here is how the two run over five years.
| Year | Keep renting, up 13% a year | Build and maintain | Cumulative rent | Cumulative own |
|---|---|---|---|---|
| 1 | $36,000 | $84,000 | $36,000 | $84,000 |
| 2 | $40,680 | $14,000 | $76,680 | $98,000 |
| 3 | $45,968 | $14,000 | $122,648 | $112,000 |
| 4 | $51,944 | $14,000 | $174,592 | $126,000 |
| 5 | $58,697 | $14,000 | $233,289 | $140,000 |
In this illustration, the lines cross during year three and the five-year totals are about $233,000 to rent versus $140,000 to build and maintain. The result is produced by the assumptions, including a 13 percent annual SaaS increase and fixed $14,000 annual maintenance. Change any of them and the crossing point moves. Add migration risk, internal support, a rebuild, or higher maintenance and ownership may never become cheaper.
When should you not build custom software?
Owning is not always the answer, and pretending it is will cost you more than any subscription. Do not build when:
- It is a commodity others maintain better than you ever will. Email, calendars, accounting, payments, and the base layer of payroll are solved, cheap per seat, and not worth your engineering time.
- Only a handful of people touch it. The build never earns back against a few subscriptions.
- The need is still changing every month. You would be building around a target that keeps moving.
- A specialist vendor should carry the compliance liability. Deep-compliance systems are safer rented from someone accountable for them.
Build when the software is core to how the business runs, stable enough to be worth owning, and expensive enough at scale that the rent has become the real cost. Those are the tools worth owning, on your own terms and in your own database, the ones you can build to fail safely and get exactly right, at a price that stops climbing.
I rebuilt a rented patient intake form for a medical practice into a system the practice owns outright. The old form charged yearly rent, held the data on someone else’s servers, and capped how many of the team could even read it. The owned version has none of those, and the meter stopped running. I have watched the same thing when a team folds five rented tools into one platform they own: five subscriptions and five price hikes become one system, and no meter.
Renting software is not a mistake. It is the right call for most of what you use, right up until a tool becomes core, stable, and expensive enough that the rent is the real cost. Run the two numbers, what it costs per person and how fast that cost climbs, find where the lines cross, and past that point, stop renting the thing and start owning it.
Frequently asked questions
Is it cheaper to build custom software or buy SaaS?
It depends on scale, lifespan, requirements, migration, and the cost of owning the system. The article’s worked example crosses during year three, but that is illustrative. Use your current contract and realistic build, hosting, security, support, maintenance, and opportunity-cost estimates. The result may favor SaaS for the full period.
How much does the average company spend on SaaS per employee?
About $9,200 per employee a year, by Vertice’s 2026 figure built on real procurement data, and Zylo’s 2026 index puts the median at $9,455. The average company runs around 275 applications, large enterprises far more, and roughly 36 percent of the licenses paid for go unused. A large share of the bill buys nothing.
Why do SaaS prices keep going up?
Because the price is the vendor’s to set, and raising it is the easiest growth they have. SaaS prices rose about 13 percent in 2026, close to five times the pace of inflation, and nearly three quarters of vendors raised prices in a single recent year. Renewals creep up, seats cost more, and features move into higher tiers, so the subscription you signed is a floor, not a ceiling.
When should you not build custom software?
When the tool is a commodity others maintain better and cheaper, like email, accounting, or payments. When only a few people use it, so the build never earns back. When the need is still changing month to month. And when a specialist vendor should carry the compliance liability. Build only what is core, stable, and expensive enough at scale that the rent has become the real cost.
What is the break-even point for replacing SaaS with custom software?
The point where the cumulative subscription cost passes the build plus its maintenance. With typical numbers, a tool many people use, a 13 percent annual price climb, and maintenance near 20 percent of the build, that crossing usually lands in year three or four. After it, renting keeps compounding while owning stays flat, so the savings grow every year.