Build or Buy Calculator
Determine whether to build software in-house or buy an existing solution
Calculate Build vs Buy Decision
💰 Buying an External Service
Annual cost for the external software license
🛠️ Building Your Own Software
Developers required for the project
Estimated development time
Average monthly salary per developer
Additional costs (insurance, benefits, etc.)
Days per month spent on maintenance and updates
📊 Analysis Results
📝 Calculation Details
Cost per Employee: $10000/month = Salary × (1 + Overhead%)
Cost to Build: $55427 = Employees × Time × Cost per Employee
Annual Maintenance: $48000 = Maintenance Days × Cost per Employee × 12 ÷ 5
Break-even: Cost to Build ÷ (License Fee - Maintenance Cost)
💡 Example Scenario
Software Development Project
Scenario: Custom CRM system for your business
External license: $12,000/year for cloud-based solution
Internal development: 2 developers, 12 weeks, $8,000/month salary
Overhead costs: 25% (benefits, equipment, office space)
Maintenance: 2 days/month for updates and fixes
Analysis Result
Cost per Employee: $8,000 × 1.25 = $10,000/month
Total Build Cost: 2 × 2.77 months × $10,000 = $55,400
Annual Maintenance: 2 × $10,000 × 12 ÷ 5 = $48,000/year
Break-even: 55,400 ÷ (12,000 - 48,000) = Never (Buy recommended)
🎯 Key Decision Factors
Time to Market
How quickly do you need the solution?
Buying is typically faster
Customization Needs
How specific are your requirements?
Building offers more flexibility
Long-term Strategy
Will you use this for many years?
Building pays off over time
⚖️ Pros & Cons
✅ Building
🛒 Buying
Understanding Build vs Buy Analysis
What is Build vs Buy Analysis?
Build vs Buy analysis is a strategic decision-making process that helps organizations determine whether to develop software internally or purchase an existing solution. This analysis considers both financial and strategic factors to make the most cost-effective choice.
When to Build?
- •Unique requirements not met by existing solutions
- •Long-term usage justifies initial investment
- •Need full control over features and data
- •Available development expertise and resources
Key Formulas
Cost to Build = Employees × Time × Cost per Employee
Cost per Employee = Salary × (1 + Overhead%)
Annual Maintenance = Days × Cost per Employee × 12 ÷ 5
Break-even = Build Cost ÷ (License Fee - Maintenance)
When to Buy?
- •Standard requirements met by existing solutions
- •Need quick implementation
- •Limited development resources
- •Break-even period exceeds 3-5 years
Tip: Consider non-financial factors like strategic importance, competitive advantage, and risk tolerance