Is Custom Software Development Making a Comeback?

Companies initially moved from custom software to SaaS because of the lower upfront costs, faster deployment, and scalability that SaaS platforms offered. SaaS reduced the burden of maintaining and updating software, while also providing better security and accessibility for a remote workforce. However, with the continuous decrease in custom software development costs and faster development times, the cost of ownership for custom software is becoming more competitive. Custom solutions now offer the added advantage of tailored functionality, which can lead to higher returns on investment by better aligning with specific business needs. So, is it time to move back to custom software to maximize scalability, flexibility, and profitability?

How SaaS Changed The Software Industry

SaaS (Software as a Service) began gaining traction in the early 2000s, with the rise of reliable internet infrastructure and the decreasing cost of cloud computing. Salesforce, launched in 1999, is widely considered one of the pioneers of SaaS, introducing a CRM platform that could be accessed entirely over the web. This model gained popularity because it was affordable, easy to deploy, and highly scalable. Companies like Salesforce, Microsoft (with Office 365), and Google (with Google Apps) played crucial roles in the evolution of SaaS, helping it become the dominant software delivery model by the 2010s. SaaS reached its peak in the 2010s, continuing to grow rapidly as cloud computing expanded globally, allowing businesses of all sizes to adopt these solutions.

SaaS solutions became popular because they allowed businesses to shift from costly, cumbersome software installations to more agile, subscription-based models. The ease of accessibility, automatic updates, and cost savings were key motivators for businesses to adopt SaaS.

Why Businesses Moved from Custom Software to SaaS Services

Businesses gravitated toward SaaS as the internet evolved because it offered a faster, more cost-effective, and scalable solution with minimal in-house technical requirements. Some of the key reasons are:

Cost Efficiency

• Custom Software: Building custom software required significant upfront investment, not just in development but also in ongoing maintenance, upgrades, and infrastructure.
• SaaS: SaaS platforms offered a more affordable option with a subscription-based model, significantly lowering initial costs. Businesses no longer had to worry about the infrastructure, as SaaS providers handled hosting, maintenance, and updates.

Ease of Deployment and Use

• Custom Software: Developing custom software could take months or even years, delaying the ability to implement solutions and adapt to market changes.
• SaaS: SaaS platforms were ready to use "out of the box" and could be deployed quickly, allowing businesses to get started without a lengthy development timeline.

Scalability

• Custom Software: Scaling custom solutions required additional investment in hardware, software updates, and often more development effort to support larger user bases or new features.
• SaaS: SaaS solutions scaled easily with the business. Providers offered flexible subscription plans that allowed businesses to add users or features without worrying about infrastructure.

Automatic Updates and Maintenance

• Custom Software: Maintaining and updating custom software required dedicated resources for troubleshooting, bug fixes, and feature updates, which often diverted attention from core business activities.
• SaaS: SaaS providers automatically handled updates, bug fixes, and new feature rollouts, reducing the need for in-house maintenance and ensuring the software stayed up to date.

Security and Compliance

• Custom Software: Security and compliance were the responsibility of the company using the software, which meant additional costs for security audits, data protection, and compliance measures.
• SaaS: SaaS providers typically offered robust security features and were responsible for ensuring compliance with industry regulations, alleviating much of the burden on businesses.

Accessibility

• Custom Software: Custom solutions often required local installation or internal hosting, limiting accessibility to within the company's network or requiring complex VPNs for remote access.
• SaaS: SaaS platforms are cloud-based, allowing employees to access software from anywhere with an internet connection. This increased flexibility made SaaS ideal for remote workforces and mobile access.

How the Software Market is Evolving: Challenges and Opportunities Ahead

The SaaS model has been incredibly successful, but several emerging factors are challenging its dominance today. One of the main issues is increased pressure on profitability. SaaS companies face rising operational costs, along with a saturated market that has driven up customer acquisition costs. As a result, companies are focusing more on retaining customers to maximize their lifetime value, which is harder when more SaaS options are available.

Additionally, changing customer expectations are causing SaaS businesses to adapt. Customers, particularly in the B2B space, are expecting more personalized solutions and self-service platforms, which can be difficult to achieve within the SaaS framework without significant customization.

This is pushing businesses to reconsider whether SaaS can meet their specific needs as they scale, especially in niche markets or industries that require specialized functionality.

Furthermore, the rise of low-code/no-code platforms is allowing businesses to develop their own applications without relying solely on SaaS providers, which is reducing the need for some SaaS platforms.

Given these challenges, businesses are increasingly revisiting custom software as a more viable long-term solution that can address their specific needs, scale as they grow, and potentially offer better returns on investment through deeper customization and ownership of the technology.

Is Custom Software the New Cost-Effective Alternative to SaaS for Growing Businesses?

Not completely, as custom software development becomes faster, more affordable, and more accessible, it is given a renewed competitive edge against SaaS. This shift is driven by advancements in development methodologies, reusable code, and automation, which collectively reduce both time-to-market and ongoing maintenance costs for custom solutions. These improvements make custom software an attractive option for medium and larger companies evaluating system upgrades or migrations, as it provides a tailored approach that SaaS often lacks.

Custom software allows businesses to achieve a high degree of flexibility and customization, particularly valuable for companies with unique workflows or security requirements that generic SaaS platforms cannot fulfill. For organizations seeking to gain control over data, integrate seamlessly with other systems, or scale without licensing constraints, custom solutions can yield a stronger long-term ROI than many SaaS models, especially as SaaS costs rise with company growth.

So when is custom software the right choice? It’s most beneficial in scenarios where:

• Unique Business Requirements: The company has specific operational needs that out-of-the-box SaaS solutions can’t address.
• High Data Security Needs: For companies with strict compliance or data security regulations, custom software provides more direct control over data protection.
• Scalability: When future growth demands flexible scaling without increasing licensing costs, custom software can be built to scale on demand.

 AI impact on custom development costs decline and shorter development time will make it a competitive solution for medium and large businesses and they should evaluate it as a serious contender during system updates or expansions. Custom software can offer substantial competitive advantages, making it well worth considering over a standard SaaS approach.