Build vs. Buy Calculator

Build vs. Buy Calculator

Does it make any sense to build your own internal software tool, if someone else already did it, and wants you to buy it? You can find it out with this build vs. buy calculator. In just a few clicks, you will determine what allows you to save more in the long-term perspective: having your developers focus on creating a new piece of software, or paying the license fee.

Costs when buying

 

If you decide to get access to an already existing platform that operates in the SaaS (Software as a Service) model, you have to pay a monthly or annual fee. Typically, this is the only cost if you settle for an external service.

Costs when building

 

The situation is a bit more complicated if you decide to build your own software. First of all, you need to estimate the one-time cost to build. You can calculate it according to the following formula:

cost to build = N * T * CE

where:

  • N is the number of developers on the team;
  • T is the time that team needs to build this software;
  • CE is the cost per employee. It is usually calculated as

CE = SE * (1 + OV)

where

  • SE is the monthly gross salary per employee, and
  • OV are the overhead costs (e.g., insurances), expressed as a percentage of the gross salary.

If you only know the hourly salary of your employee, you can use this hourly to salary calculator.

Apart from the one-time cost, any software that is built internally requires some maintenance. Every once in a while, one (or more) of your employees will devote their time and effort towards the product they’ve built. You can find the annual costs of maintenance according to the formula below:

maintenance costs = D * CE * 12 / 5

where

  • D is the number of days per month that one of your employees will spend on maintenance,
  • CE is the cost per employee,
  • 12 stands for the number of months in a year, and
  • 5 is the number of working days in a week.

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