The verdict in three sentences
Licences suit small teams and standard needs: low entry cost, fast deployment. Custom development becomes profitable once user count and usage duration push cumulative licences beyond 80,000-100,000 EUR. For an SME, the threshold often sits between 30 and 45 users over a 4-year horizon.
Licence vs build: the base costs
A licence is paid per user per year, with no capex but indefinitely. A build is paid once, with annual maintenance lower than cumulative licences above a certain volume. Beware: both models have distinct hidden costs.
| Line item | Licence | Custom development |
|---|---|---|
| List price | 200-800 EUR/user/year | 35,000-80,000 EUR |
| Deployment | Days | 2-4 months |
| System integration | 3,000-10,000 EUR | Included in build |
| Training | 1,500-4,000 EUR | 2,000-6,000 EUR |
| Support | Included or 15-20 % | Maintenance 8-15 %/year |
| Extensibility | Vendor-limited | Total |
| Ownership | No | Yes |
Cumulative cost per user tier
Compare a licence at 500 EUR/user/year and a build at 55,000 EUR with 10 % maintenance (5,500 EUR/year), over 4 years.
| Users | Licences 4 yrs | Build 4 yrs | Winner |
|---|---|---|---|
| 10 users | 20,000 EUR | 77,000 EUR | Licence |
| 25 users | 50,000 EUR | 77,000 EUR | Licence |
| 40 users | 80,000 EUR | 77,000 EUR | Build |
| 60 users | 120,000 EUR | 77,000 EUR | Build |
| 90 users | 180,000 EUR | 77,000 EUR | Build |
| 150 users | 300,000 EUR | 77,000 EUR | Build |
From 40 users, the build becomes cheaper and stays so with a widening gap. Below 25 users, the licence keeps the edge unless the need is very specific. Code ownership and no price hikes are unpriced but real benefits.
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Mini case study
Fatou, head of a 70-person distribution SME in Dakar, equips 48 staff with licensed management software at 480 EUR/user/year, i.e. 23,040 EUR/year. Over 4 years that's 92,160 EUR, plus 8,000 EUR of initial integration. Custom development at 58,000 EUR + 6,000 EUR/year maintenance would cost 82,000 EUR over 4 years. Saving: about 18,000 EUR, plus tool ownership and the end of the vendor's annual hikes. Payback lands during year 3.
FAQ
Above how many users is a build profitable? Generally beyond 40 users over 4 years with a 500 EUR/year licence. The threshold drops if licences are pricier or the need more specific.
What are a licence's hidden costs? System integration (3,000-10,000 EUR), training, support sometimes billed at 15-20 % extra, and above all annual price hikes.
Is a build riskier than a licence? Short-term yes (lead time, upfront cost), but it removes lock-in and hikes. Manage risk with precise scoping and a code-ownership clause.
Can custom development be capitalized? Yes, developed software is a capitalizable and depreciable asset, often over 3 to 5 years, improving tax treatment versus a licence expense.
What if the vendor raises prices? With a licence you absorb the hike (often 5-12 %/year). With an owned build your cost stays stable, limited to maintenance.
Let's scope your project. Tell us your user count and current licence price, and we'll calculate your payback point. Detailed quote within 48 h. WhatsApp +221 77 596 93 33.
Mohamed Bah
Fondateur, Kolonell
Passionate about digital and entrepreneurship in Africa, Mohamed has been helping Sénégalese businesses with their digital transformation since 2020. Founder of Kolonell, he believes every SME deserves a professional and accessible online présence.
