Build vs. Buy Calculator

Compare the total cost of building software in-house against buying or subscribing to a solution. Enter upfront and annual costs for each option to see total cost over your analysis period, the break-even year, and which option costs less.

Quick Facts

Formula
Total cost = Upfront cost + (Annual cost x Years)
Compares cumulative build cost against cumulative buy cost over your chosen analysis period.
Break-even
t = (Build upfront - Buy upfront) / (Buy annual - Build annual)
The year the two cumulative-cost lines cross; only meaningful when buy's annual cost exceeds build's.

Your Results

Calculated
Total cost to build
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Upfront + annual maintenance over the period
Total cost to buy
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Upfront + annual subscription over the period
Break-even point
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Year the cumulative costs cross
Savings at end of period
-
Cheaper option's advantage over the period

Ready

Enter build and buy costs and an analysis period, then press Calculate.

How the Build vs. Buy Calculator works

This tool answers a common technology and operations question: does it cost less over time to build a capability in-house or to buy (license, subscribe to, or outsource) an existing solution? It uses a standard total cost of ownership (TCO) comparison and finds the break-even year where the two options cost the same cumulatively.

The formula

For each option, total cost over an analysis period of N years is:

Total cost = Upfront cost + (Annual cost × N)

Building typically has a larger upfront cost (development) and a smaller ongoing cost (maintenance, hosting). Buying typically has a smaller upfront cost (setup, integration) and a larger ongoing cost (subscription or license fees). The break-even year — where cumulative build cost equals cumulative buy cost — is found by setting the two totals equal and solving for time t:

t = (Build upfront − Buy upfront) / (Buy annual − Build annual)

Before that year, whichever option had the lower cost at year zero stays cheaper. After it, the other option becomes cheaper. If buy's annual cost never exceeds build's annual cost, the two lines never cross and one option remains cheaper for every year in the comparison.

Worked example

Suppose building costs $150,000 upfront with $20,000 per year to maintain, while buying costs $10,000 upfront with $60,000 per year in subscription fees. Over a 5-year analysis period: total build cost = $150,000 + ($20,000 × 5) = $250,000, and total buy cost = $10,000 + ($60,000 × 5) = $310,000. Building saves $60,000 over 5 years. The break-even year is (150,000 − 10,000) / (60,000 − 20,000) = 3.5 years — before that point, buying was cheaper cumulatively; after it, building pulls ahead.

What to include in each cost

  • Build upfront: design, development, and testing effort (engineering time converted to cost), plus any one-time infrastructure setup.
  • Build annual: ongoing maintenance, bug fixes, hosting/infrastructure, and the fraction of engineering time spent supporting the build each year.
  • Buy upfront: implementation, data migration, integration work, and any one-time vendor onboarding fee.
  • Buy annual: subscription or license fees, per-seat costs, and recurring vendor support or integration maintenance.

What this calculator does not cover

This is a pure cost comparison. It does not weigh non-cost factors that often decide real build-vs-buy calls: how much control and customization you need, vendor lock-in and switching costs, data security and compliance requirements, time-to-market pressure, and whether the capability is a core differentiator worth owning versus a commodity worth outsourcing. Use the cost numbers as one input alongside those considerations.

Frequently Asked Questions

What formula does this calculator use?
It compares total cost of ownership for each option: total cost = upfront cost + (annual cost × number of years). The break-even year is found by setting the two cumulative-cost lines equal and solving for time: t = (build upfront − buy upfront) / (buy annual − build annual). Before that year one option is cheaper; after it, the other becomes cheaper.
What counts as annual cost for each option?
For the build annual cost, include ongoing maintenance, hosting or infrastructure, and the engineering time spent supporting or updating the in-house build. For the buy annual cost, include subscription or license fees plus any recurring vendor or integration support fees. Leaving out real recurring costs, like engineer time, is the most common way a build-vs-buy comparison ends up wrong.
When is there no break-even point?
If the annual cost of the cheaper-upfront option never exceeds the annual cost of the other option, the cumulative cost lines never cross and one option stays cheaper indefinitely. This happens when buying's ongoing subscription cost is lower than or equal to what it would cost to maintain a build in-house.
Does this calculator account for factors beyond cost?
No, this is a pure cost-of-ownership comparison. It does not weigh strategic factors like control, customization, vendor lock-in, data security, or time-to-market. Those are frequently decisive in a real build-vs-buy decision and should be considered alongside the cost numbers.

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