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I think a good way to get an understanding of this is to start a company yourself.

You’ll quickly learn why businesses make the decision to pay for software instead of cobbling together open source.

Let’s say you’re a small, but growing company doing $2M ARR. You absolutely could run your email marketing using an open source tool hooked up to Amazon SES and save a thousand bucks a month over something like Mailchimp.

But the problem is, it’ll take you up to a week to get setup (thousands of dollars lost already) and then none of your employees will understand how to send emails with it (thousands of dollars wasted in training). Once they do understand how to use it, it will likely still be slower than a dummy-proof visual UI that has been battle tested on thousands of customers instead of an esoteric open source solution. If it wastes 8 hours of employee time per month, that’s another $1k a month lost.

Then when something goes wrong, which it always does, it’ll require expensive developer time (likely costing the company $1000-$1500/day per engineer all-in) instead of a simple support phone call.

And when you realize the open source version is missing a feature you need, you have to build it yourself, of which any trivial engineering task inside the company will cost at least $5k in employee time. Not to mention the cost to maintain the feature when the open source team breaks it with an update.

So, you’re already in the hole and losing money compared to Mailchimp.

This says nothing about the opportunity cost of engineering time that could have been spent serving your own customers, allowing you to generate more revenue.

You can generate revenue to infinity, but can only cut costs to zero. For a growing company, time spent on cost saving over making new sales is likely time wasted.




Let me give you a counterpoint on this: non-developed countries (non 1st world countires?).

A startup in say, Mexico or LatAm will look at the OpenSource version of say Business Intelligence applications (Metabase, Superset in the link), then look at the commercial versions of them (Tableau, Lookr). With the price needed to pay for the commercial versions, the startup can hire 2 or 3 developers (at local rates) to do whatever improvements they need to the open source application.

Something similar happened to me with Jumio about 5 years ago: I wanted to use it. I spoke with their sales 2 or 3 times in 4 years. THe problem is that, every "verification" was costing more than $1 USD... for less than that cost, my company could hire 3 people a month to do manual verification and more (considering the cost of hiring + cost to the company, including Mexico's hefty employer costs). It never made economic sense to do implement automation.


Mexican here. We used to run our own mail server ten years ago: it was fast, each mailbox had a lot of space, we ran our own mail campaigns, in general it was awesome... until it wasn't.

Doing your own maintenance, antivirus, spam detection can be a demanding job, but getting out of a blacklist is ten times worse. We gladly pay Google Workspaces to leave that suffering to the specialists, we couldn't do it better if we tried our best.

You either pay with time and work, or you pay with money. Sometimes spending the money is the better trade off.


This is where the maxim of open source being 'free as in puppies not free as in beer/lunch' comes from.

I started my career in open source and still strongly believe in FOSS tenets, but enterprises are looking more to de-risk their projects and platforms.

Risk is reduced when you have a vendor you can hold accountable for issues in the product, hence making proprietary solutions (and sometimes open source but wrapped in enterprise support solutions) the only viable choice for a business.


Any luck holding Microsoft, Google or Apple accountable for issues in their operating systems?


I am sure large companies have that lever: I know of a large multinational company (around 150,000 employees along all contintents) that moved from SuccessFactors to Workday. Those are huge contracts.


Reasons for switching contracts can be numerous, and, from my experience, the level of support and quality of the actual application is rarely one of such reasons.


Yes, custom B2B support contracts that deviate from the terms of support that everyone else gets is not unusual.

For example: a large organization might get a "Microsoft Custom Support Agreement" if they want to get security updates after the date that MS stops providing security updates.

As with any negotiation, if you have leverage (i.e. dollars), you can negotiate.


While I understand and generally agree with your points, I do find the idea of "holding a vendor accountable" to be more of a philosophy than something I've generally witnessed happen in real life. At some point that needs to stop being weighed on the scales when doing "build vs buy" math for any but the largest companies or most attentive vendors.


Not OP, but I think in this context "holding a vendor accountable" means "if the product sucks, you will stop paying them."


“free as in puppies” is an excellent phrase


> If it wastes 8 hours of employee time per month, that’s another $1k a month lost… it’ll require expensive developer time (likely costing the company $1000-$1500/day per engineer all-in)

That's not universally true, of course. That money would buy you a week of developer time in most of Europe, and even a month of developer time in some developing economies.


Pitching in to confirm - currently i work as a full stack dev in Latvia with 5 years of experience and a Master's degree, my net salary is around 1500 euros per month.

Most SaaS offerings without free tiers indeed are unlikely to be used.

I even had to buy the JetBrains tools myself to be able to navigate 1M SLoC Java codebases easily, refactor with confidence, whilst not resorting to piracy like some of my countrymen do. Even if definitely worth it, i still had to look at the price tag for a while, seeing as it's essentially food for a month or two: https://www.jetbrains.com/idea/buy/#personal?billing=yearly

Developer salaries vary wildly over the world, though i guess some SaaS solutions also do location based pricing, which may or may not have historically worked.


> That money would buy you a week of developer time in most of Europe

That's only true if you live in Poland and also ignore the all-in cost of your employees. A good rule of thumb is to assume 2-3x salary for the all-in cost of having a workforce.


Most engineers in Poland prefer anything BUT full time employment, so all-in the tax for engineering work is like 8.5%/19% with a ~$120/mo mandatory health insurance. They'd rather get hired as freelancers and pay less taxes (and burn less money contributing to the broken social security system).


I run a business and employ several software developers. What you are saying has absolutely not been my experience.


In Germany average consulting rates, run around 100 euros per hour.

https://www.freelancermap.com/blog/freelance-market-study-ge...

Plus some management expenses, and it turns into around 1000 euros per delivery day for a FTE.

Then we can go to the companies doing high level consulting and pull some notches still.


Sure, there's ample opportunity for everyone in the industry to throw money into the sea.

The comment that I was replying to specifically referred to employee time per month. That's naturally going to be different from some high-rate consultant, so this is totally an apples-to-oranges comparison.

Furthermore, it's a large market and there are plenty of consultancies in Europe charging significantly less than that.


I’ve had a quick look into some of the tools on the list. We even use at least one, but we still pay for the hosted solution. Why?

* We’re a shop full of developers, but none of us have the required skill set to host and debug a python app.

* We’re fairly well booked. Any time I’d assign one of the folks to maintaining tool X, I’d have to take from time assigned to client work. Which means the internal cost is not what’s interesting. What counts is “how much do I loose by not having them work in billable hours?”

All of this means that the calculation is strongly tilted in favor of buy.


For you perhaps, in your circumstances. Surely you weren't thinking you could project your specific circumstance to software development companies more broadly?


In Germany, the average Software Dev salary is about 50k€/year. That's a total payroll cost of about 60k€/year after taxes, social security etc., so around 300€/workday. Add some money for office space, equipment, overhead, etc, and adjust by factor of two in either direction depending on location and role.

Of course if you hire a freelancer, prices are very different and 1500€/day is very reasonable.


Either I have been very, very lucky or you are basing yourself in outdated reports. In Berlin (one of lowest cost-of-living German cities) you will have trouble to find even junior developers working for 50k€/year.


if you look at the numbers raw it might be salary for a week but assuming your developer has stuff on his/her plate and this stuff actually will make you more money in the long run (why would they be employed by you otherwise?) its more than their raw salary and the cost of hardware and rent. opportunity cost.


I'm familiar with the concept of opportunity cost, but the question of whether to build or buy is highly context-dependant. As is so often the case in software development: it depends. Not all B2B tools are the same. Not all integration efforts are the same. Not all developer hours cost the same. Not every return on investment is the same.




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