SaaS: internal development or integration of external software?

The definition of the architecture of a SaaS software is one of the main tasks of a CTO (Chief Technology Officer). The SaaS must be scalable, stable, and easy to maintain. It must ensure high availability and be able to evolve rapidly with the addition of new features, while still maintaining backward compatibility. 

When a startup is building the SaaS, there are three aspects that assume fundamental importance:

• high speed of development, especially in the case of releasing the first public version;

• limited budget;

• small development team.

In analyzing the functionalities that the software will need to implement, a Hamlet-like doubt arises in the mind of the CTO: integrate third-party software or develop the functionality internally?

For components that are very close to the core business logic of the SaaS, internal development is the only possible answer; for other components – such as authentication, authorization, notifications, image and file management, subscription management – the answer is not so obvious.

Internal Development

With internal development, functional adherence is maximum, but the workload for the team increases, and consequently, so do the product release times.

Internal development is the only solution for the most peculiar aspects of the software. For accessory components, however, in addition to defocusing the team, it could be a choice that is not robust in terms of security (as in the case of authentication) or functional coverage (subscription management).

At Startup Bakery, we have already asked ourselves many questions about this and have tried to provide some answers.

Integration of Third-Party Software 

The integration of third-party components might seem like the best choice when wanting to increase development speed with little impact on the team. Relying on widely used commercial products with proven quality offers advantages in terms of security and reliability. However, there are some aspects to consider:

• the search for the software to integrate requires time and attention;

• the final selection of the software requires tests and Proof of Concept to be conducted by the team to verify the operation of the chosen service and its actual correspondence with expectations;

• the cost of integration in terms of development hours and data model adaptation can be considerable;

• the subscription costs for the service can be high and difficult to estimate, especially in the presence of products with variable pricing and as the load on the SaaS increases;

• the privacy issues that may arise in the case of services provided outside the European Union;

• the dependence of fundamental SaaS logic on other services that are out of our control and can vary over time.

This last point is a risk that grows proportionally to the number of integrations and is higher the closer the integrations are to the "core" of the SaaS. Therefore, it must be mitigated during the integration design phase.

Last but not least, managing many external services (each with its own dashboards, subscriptions, and configurations) is not a trivial task at all.

Internal Development or Integration of External Software: Which to Choose?

As a general rule, internal development remains the best choice if the functionality is very close to the core business logic of the SaaS or if its development presents a complexity comparable to that of developing an integration. 

The integration of external services, on the other hand, is the best choice for specialized and delicate functionalities, especially when the market offers established and recognized solutions as standards. The same reasoning applies when security must be guaranteed, as in the case of authentication, subscription management, and payments. In these cases, it is preferable to choose a third-party service provided by reliable entities with good integration documentation available. 

Whereas in all other cases, a thorough cost/benefit evaluation of both possibilities becomes necessary. 

Startup Bakery helps its startups in this choice, providing a framework composed of ready-to-integrate software modules, high value-added services, including a NLP pipeline (Natural Language Processing), various accessory services based on machine learning, available via API, and selected third-party software across various domains, from authentication to payment management.

Through the Framework and the experience in SaaS development of the Startup Bakery team, the phases of search and selection of software are significantly reduced, including the study of integrations and their impact on the data model, as well as the development of many accessory components, allowing the startup team to focus more on the product and reduce the time to reach the much-desired MVP (Minimum Viable Product).

Startup Bakery is the Italian startup studio specialized in creating B2B SaaS companies with Artificial Intelligence. We offer aspiring Co-Founders the opportunity to develop a business idea. We create investment opportunities for Professional Investors. We help companies in the innovation process.