Total Cost of Ownership for Custom Software
By CodexierPublished 5 min read
When a company compares a custom system with an off-the-shelf subscription, it usually compares the build quote with the subscription price. That comparison is wrong from the start: the quote is a one-off, the subscription includes running costs, and the custom system still needs hosting, updates and people after launch. This guide lists the cost lines that follow custom software through its life and gives a worksheet for a five-year view.
Build is often the smallest part
Software does not stay finished. Operating systems, browsers and the libraries it depends on change constantly, security holes are found and must be patched, and the business around it changes what it needs. Each of those produces work every year, whether you plan for it or not. The difference between a well-run system and a costly one is mostly whether that work is predictable.
Hosting and infrastructure
Hosting is the most visible running cost and usually not the largest. It covers servers or cloud services, the database, file storage, email sending, domains and certificates, monitoring and backups. Two things make it grow: usage (more users, more data, more traffic) and architecture choices made during the build. A system designed for many servers costs more to run than it needs to when it has a few hundred users.
- Ask the builder for an estimate of hosting costs at today's usage and at several times today's usage.
- Check which services are billed per user or per request, since those grow with success.
- Make sure accounts for hosting, domains and third-party services are registered to your company, not the supplier.
Maintenance and security
Maintenance is the work that keeps the system working as it is: dependency and security updates, framework upgrades, fixes when an external API changes, and backups that are actually tested. Skipping it saves money for a year or two and then arrives as one large, urgent project when something breaks or a major version goes out of support. Under GDPR you are also required to keep appropriate security for personal data, which in practice means patching.
| Cost line | How often | What makes it larger |
|---|---|---|
| Security and dependency updates | Monthly | Many third-party packages, old versions |
| Framework or platform upgrade | Every few years | Updates skipped in between |
| External API changes | Unpredictable, several times a year | Many integrations (payments, Fortnox, BankID, CRM) |
| Backups and restore tests | Continuous, tested quarterly | Large data volumes, several databases |
| Monitoring and incident response | Continuous | High availability requirements |
Our guide to what a maintenance plan should include goes through these items in more detail.
Support and change requests
Support is answering users and fixing what goes wrong in daily use. Change is new functionality: a new report, a new integration, a changed process. Change is where most long-term cost lives, and it is also where the system earns its value, because the whole point of custom software is that it fits how you work. Budget for change as a yearly allowance rather than treating each request as a surprise, and read how to handle change requests before signing a contract.
Two hidden costs belong here too: your own staff's time spent testing, specifying and training, and the cost of knowledge leaving. If only one developer understands the system, their departure is a cost line. Documentation and code you own reduce it.
A five-year TCO worksheet
Fill in one column per option you are comparing, for example custom build, off-the-shelf subscription and a hybrid. Use quotes where you have them and ranges where you do not; the point is to see the shape, not to be exact to the krona.
| Line | Year 1 | Years 2 to 5 (per year) | Notes |
|---|---|---|---|
| Build or setup | Quote | None | Include your own project time |
| Licences and subscriptions | Per user or flat | Expect price increases | Check notice periods for price changes |
| Hosting and third-party services | Estimate | Grows with usage | Ask for a growth estimate |
| Maintenance and security | Plan fee | Plan fee | Plus a framework upgrade in the period |
| Change allowance | Small | Yearly budget | Where the business value is |
| Internal time | Specification, testing, training | Admin and support | Often forgotten |
| Exit or replacement | None | Migration at end of life | Easier if you own code and data |
When you should not build custom at all: if an off-the-shelf tool covers most of what you need and the gap is a process you could adapt, the subscription usually wins on five-year cost, and we will tell you so. Custom software pays off when the process is a competitive difference or when several subscriptions and manual workarounds add up to more than owning one system. If you already have a system whose running costs are climbing, our scaling and upgrade service starts by finding where the cost comes from; see pricing for the starting points.
Frequently asked questions
Is SaaS always cheaper than custom software?
Not always. Per-user pricing grows with the team, prices tend to rise over time and workarounds for missing features cost staff time. Compare both on the same five-year worksheet before deciding.
Can custom software be capitalised in the accounts?
Development expenses can in some cases be recorded as an intangible asset and depreciated rather than expensed at once. The rules depend on your accounting framework, so ask your accountant before the project starts.
What reduces total cost of ownership the most?
Choosing a mainstream, well-supported technology, keeping dependencies few, owning the code and accounts, and paying for regular maintenance instead of letting updates pile up.
When should software be replaced instead of maintained?
When each change takes disproportionately long, the underlying platform is out of support, or maintenance costs approach what a rebuild would cost over the same period. A health audit gives you the facts before that decision.
Want the five-year picture for your system?
Bring the quote or the system you are weighing up. In a short call we go through the cost lines above and point out the ones most likely to surprise you. Book a call.
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