Build vs Buy Calculator
Compare the total cost of ownership of building in-house vs buying/subscribing over a chosen period, to decide which is cheaper.
Input Data
Results
At a glance:Build vs Buy compares the total cost of ownership of developing in-house vs buying/subscribing, over the same period. build total = development + annual maintenance x years; buy total = purchase + annual subscription x years; difference = build - buy (positive = buy cheaper, negative = build cheaper). Example: build 200k dev + 30k/yr; buy 50k + 40k/yr; 5y: build 350k, buy 250k, diff 100k (buy cheaper). WARNING: Only quantifiable direct costs; strategy, lock-in, talent and opportunity cost matter too; test multiple periods. For major calls, add professional advice.
Formula
Buy cost (PV) = Σ (subscription fee_t / (1 + r)^t) over the horizon.
Build cost (PV) = development + Σ (maintenance_t / (1 + r)^t).
Choose build if build PV < buy PV (or compare ROI / payback).
$$C_{\text{build}} = D + M \times y$$$$C_{\text{buy}} = P + S \times y$$$$\Delta = C_{\text{build}} - C_{\text{buy}}$$How to Use
- Enter the build one-off development and annual maintenance.
- Enter the buy one-off purchase and annual subscription.
- Enter the comparison period to see both totals and the difference.
FAQ
What does a positive or negative difference mean?
Difference = build total - buy total. Positive means build costs more, so buying is cheaper over that period (e.g. +HK$100,000 = buying saves ~HK$100,000). Negative means build is actually cheaper. Near zero means they are close, so decide on non-financial factors (control, flexibility, risk). The result is highly period-dependent: build is front-loaded (high dev, low upkeep); buy is light upfront but subscriptions accumulate. Longer horizons often favour build; short ones favour buy. Test 3, 5 and 8 years.
Is cost the only thing to consider?
Far from it. Cost is the easiest to quantify but not necessarily the most important. Beyond cost, weigh: build — full control of features and data, tailored to needs, possible competitive edge, no vendor lock-in; buy — faster rollout, vendor-maintained, low upfront, lets you focus on core business, risk shared with vendor. Also consider in-house talent and time, the opportunity cost of building, and whether the capability is core (build) or non-core (buy). Cost analysis is the start, not the end.
When can build actually be cheaper?
When the buy option's recurring fee is high but build's development hurdle is low. Example: build dev 150k + upkeep 20k/yr; buy purchase 30k but subscription 60k/yr; over 5y build = 250k, buy = 330k, difference = -80k — build is HK$80k cheaper. So never assume buy is always cheaper or build always dearer; it depends on the actual one-off and recurring structure. Also check you truly have the talent and time to build and maintain.
How do I read the break-even year?
The break-even (payback) year is where the two lines cross: break-even years = (development - purchase) / (subscription - maintenance). In the example (200k-50k)/(40k-30k) = 15 years. Before it, buy is cheaper; after it, build is cheaper. Use it to judge if you will use the capability long enough for build to win.
Any Hong Kong notes?
For Hong Kong SMEs, this supports decisions on IT systems, equipment and process build-outs; factor in Profits Tax deductibility of the costs and the Inland Revenue Ordinance's record-keeping (7 years). The HKPC and HKTDC offer SME support. Treat the result as a financial reference, not the sole basis.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.