SaaS vs Custom Development: How do you decide?

Since we offer a SaaS product that digitises the real estate industry, we've seen both enthusiasm and scepticism regarding this business model. The debate is valid throughout many other industries as well, and clients often argue which type of solution is best for them. The SaaS market is growing (and estimated to reach $702.19 billion by 2030), but this doesn’t mean that there’s no reluctance toward this type of software.?

After hundreds? of client interviews, insight gathering from mentors and partners and years of activity in software development, I decided to discuss the advantages and disadvantages of both SaaS and Bespoke technologies.

First one, SaaS, a business model we opted for our primary product, the 3D digital twin end-to-end leasing and marketing solution for commercial real estate.

?SaaS Benefits

• Lower efforts and budgets associated with SaaS product upgrades are lower , as providers grow continuously based on “community intelligence”. Several users might have experienced the same issue as you, which assists in continual improvement of the product or service. By doing so, SaaS products are transformed into live organisms with a high degree of elasticity and flexibility.?
• SaaS acquisition is financially more productive, as the cost belongs to the OpEx category (short-term costs), whereas Custom developments usually go under the CapEx category (long term investments).
• Faster deployment, optimal for agile processes. An organization with a test mentality will see the benefits of using a new product early on and measuring its impact.
• A SaaS service or product is often modular, which means that you can opt and test for parts of it that help you the most in your processes. Depending on your needs, usage, or company size, some providers may offer multiple solutions.

SaaS Downsides

• Generally, large organisations prefer to keep their security keys on premises instead of entrusting them to SaaS providers (McKinsey ). However, on-premise solutions tend to become less and less effective, leaving room for private clouds, which are also offered by SaaS companies.
• Security and ownership. A SaaS is perceived to be an external solution that isn't as trustworthy as an internal solution developed based on their specific needs.
• Customisation isn’t as on point as with bespoke solutions. While some SaaS solutions allow for a certain degree of customisation, none of them will completely reflect the brand, identity, and values of a company.
• Legal concerns - when working with a SaaS, usually, any potential legal action will have to fall under the SaaS provider national law.?

Custom Development Benefits

• The company gets exactly what they want and need, with very little disruption among the team. This does translate into a very well understanding of their needs and potential upcoming challenges and opportunities.
• You own the IP.
• There are less security risks.
• It’s easier to optimise a certain process that rarely changes.

Custom Development Downsides

• More time and budgets go into development, as “less than 10% of developers can deliver a typical software solution with basic features in less than 2 months”.
• It can be harder to keep up with an organisation’s constantly changing needs, which means that once you do have this custom developed software, there’s the risk that you might not need it anymore.
• It’s not enough to build a product that answers a specific challenge. If that problem hasn’t been properly mapped, then the software can become impractical.
• Lack of market and community knowledge. A SaaS can come with a lot of flexibility and agility and this can be harder to replicate with a team developing a custom software. Furthermore, this team can change, which means a higher learning curve for the new development specialists.?

A proposed approach: a shift in mentality?

I think there’s a lot of room for integration, making the most out of the two approaches. Agile, SaaS technologies meet custom, identity-based solutions, in order to provide the best business results.?

In order for this to happen, we need to stop praising custom developments for the sake of ownership. After all, it’s not owning your own software that will send you to the top, but your understanding of how you can best meet your clients’ expectations. SaaS solutions are the fuel that accelerates your rapid growth.

This article was originally published in Entrepreneur .