The verdict in three sentences
TCO, not the sticker price, should drive the decision: a cheap-to-enter SaaS can become the most expensive over 5 years once licences, integrations and exit cost add up. A custom build concentrates its cost in year 1 then stabilises at 15 to 20 % annual maintenance. Always model line by line over 5 years with amortisation before signing.
The line-by-line TCO grid
Here are the lines to include for an honest comparison, here for 75 users.
| Cost line | Market SaaS (5 yrs) | Custom build (5 yrs) |
|---|---|---|
| Licences (75 users, GBP 60/mo) | GBP 270,000 | GBP 0 |
| Setup / initial integration | GBP 12,000 | included in build |
| Initial build | GBP 0 | GBP 120,000 |
| Hosting / infrastructure | included | GBP 18,000 (3,600/yr) |
| Maintenance (18 %/yr) | included | GBP 108,000 |
| Version upgrades | included | included in maintenance |
| Connectors / API | GBP 20,000 | included |
| Exit cost / migration | GBP 30,000 | GBP 0 (you own it) |
| 5-year total | GBP 332,000 | GBP 246,000 |
Amortisation and the vendor lock-in effect
Custom software amortises over 3 to 5 years, easing taxable profit; a SaaS licence stays a pure expense. Above all, vendor lock-in creates a hidden cost: the more your data and processes depend on the SaaS, the higher the exit cost swells.
| Factor | SaaS | Custom |
|---|---|---|
| Accounting nature | expense (OPEX) | amortisable asset (CAPEX) |
| Cost predictability | 8-10 %/yr hikes | stable maintenance flat fee |
| Code owner | no | yes |
| Switching cost | GBP 30,000 + | low (you own the code) |
| Scalability | capped by vendor | unlimited |
Mini case study
Sarah, CFO of a consulting firm in London, pays a vertical SaaS GBP 64/user/month for 75 consultants, or GBP 57,600/year, plus GBP 20,000 of connectors over 5 years. Her projected SaaS TCO reaches GBP 315,000, exit cost included. A custom build is quoted at GBP 120,000 + 18 %/year maintenance, or GBP 228,000 over 5 years, amortisable over 4 years. Net saving: GBP 87,000, plus a balance-sheet asset and the end of annual hikes. She approves the build after modelling every TCO line.
FAQ
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Which lines are most often forgotten in a TCO?
Exit cost (migration, rebuilding integrations) and paid API connectors. Together they often add GBP 30,000 to 50,000 to the real SaaS cost over 5 years.
What maintenance rate should I use for a build?
Between 15 and 20 % of the development cost per year. For a GBP 120,000 build, budget GBP 18,000 to 24,000/year covering fixes, enhancements and upgrades.
Is custom software really an accounting asset?
Yes: software built in-house or commissioned can be capitalised and amortised over 3 to 5 years, unlike a SaaS subscription which stays an operating expense.
How do I limit SaaS vendor lock-in?
Require a full data export in a standard format, document your integrations and negotiate a reversibility clause. This reduces exit cost without eliminating it.
Over how many years should I model the TCO?
Five years is the right horizon: it covers a software's useful life and reveals the tipping point, invisible on a 1- or 2-year calculation.
Let's scope your project. Send us your current licences, integrations and horizon: we build your line-by-line 5-year TCO grid. 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.
