Why organizations are choosing SaaS over building their own software?


As businesses consider their digital strategy, they may be faced with deciding whether to build their own software, buy commercial software, or rent SaaS (Software as a Service) solutions. Each option has advantages and disadvantages, and businesses should carefully evaluate their needs and resources before deciding.

Building software in-house may be a good option for companies with specialized requirements or for those who want complete control over their software. However, it can be costly, time-consuming, and requires significant expertise and resources.

Three decades ago, an organization with a development team would have built or outsourced the task to build a software.

The main reason for the prevalence of in-house software development were:

Lack of commercially available software: In the past, fewer commercial software products were available, so companies often had to build their own software to meet their specific needs and requirements.

Cost: Building software in-house was often less expensive than purchasing commercial software. Additionally, licensing fees and ongoing maintenance costs associated with commercial software, made in-house development a more cost-effective option for many companies.

Compliance was not a major concern: There were fewer regulations in place that mandated specific data privacy and security requirements for software. Companies were unaware of the potential risks and liabilities associated with software development and use. The primary focus was on building software that worked, rather than ensuring that it met specific compliance requirements. The amount of data being collected and stored was much less 20 years ago, making the risks associated with non-compliance lower.

As time passed, there was a shift toward purchasing software rather than building it in-house. This shift was attributed to several factors, such as:

Availability of commercially available software

Improved Features: The software available commercially was much more robust and had better features.

Cost: While building software in-house can be less expensive in the short term, purchasing commercial software was more cost-effective in the long term, given the expenses associated with ongoing maintenance and updates.

Time to market: Purchasing commercial software became faster and more efficient than building software in-house, as companies could take advantage of pre-existing solutions and focus on other business-critical tasks.

Recently, the popularity of SaaS has grown significantly due to advancements in technology and the increasing demand for cloud-based solutions. SaaS allows businesses and individuals to access software applications online, eliminating the need for local installations and hardware. The benefits of SaaS such as scalability, cost-effectiveness, and accessibility, have led to a growing adoption among businesses of all sizes, making SaaS one of the fastest-growing segments in the technology industry. Increased efficiency and cost effectiveness are why many businesses turn to cloud-based SaaS solutions.

The advantages include:

  1. Accessibility: SaaS applications can be accessed from anywhere with an internet connection, making it easy for remote workers and teams to collaborate.
  2. Cost-effectiveness: SaaS eliminates the need for expensive hardware and software licenses, as the cost is typically a monthly or annual subscription fee. The setup and infrastructure costs are low.
  3. Scalability: SaaS allows for easy scaling of services as the needs of a business change,, without the need for significant capital expenditure.
  4. Maintenance: SaaS providers handle maintenance, security, and upgrades, freeing up internal IT resources for other tasks.
  5. Data security: SaaS providers typically have robust security measures to protect customer data, reducing the risk of data breaches and loss.
  6. Time-to-Market: The time-to-market for a SaaS solution is significantly less.
    1. Rapid deployment: SaaS applications can be set up and deployed quickly without the need for significant hardware or software installation.
    2. Reduced development time: SaaS providers typically have a team of experts who handle ongoing development and maintenance, reducing the time and effort required to bring new products to market.
  7. Integration: SaaS solutions can often be integrated easily with other cloud-based applications, reducing the time and effort required to set up complex systems.
  8. Innovation: SaaS providers are often at the forefront of innovation and can offer access to the latest technology, helping businesses stay ahead of the competition..

Authored by – Abhishek Kumar
Product Management Expert