Self-hosted vs SaaS: a cost comparison you can reproduce

Short answer: compare total cost over three years, not the monthly price. For self-hosting, add the server, storage, backup, domain, your time valued at a realistic rate, and an allowance for incidents. For SaaS, add seats and usage at your expected growth, price increases and add-ons you will need. Self-hosting usually wins at larger user counts and loses for very small, low-effort uses.

The prices below are placeholders to show the method. Replace them with real quotes. I do not claim these figures represent any specific vendor.

What goes into the self-hosted side?

• Compute: a VPS or your own machine amortised over its life.
• Storage and bandwidth: often included, sometimes not.
• Backup storage: off-site object storage is cheap but not free.
• Domain and DNS.
• Setup time: one-off hours.
• Maintenance time: hours per month, forever.
• Incident allowance: a day or two per year when something goes wrong.
• Tooling: monitoring, mail relay, paid support if any.

What goes into the SaaS side?

• Seats multiplied by price, at today's headcount and at your three-year headcount.
• Usage tiers: records, automations, API calls or storage that push you into the next plan.
• Add-ons you need but are not in the base plan: single sign-on, audit logs, advanced permissions, extra environments.
• Price increases. Assume some.
• Migration cost if you leave later.

A worked example with placeholder numbers

Imagine a team tool, 25 users, three years.

SaaS
  25 seats x 800/month x 36 months          = 720,000
  SSO + audit add-on 5,000/month x 36       = 180,000
  Total                                     = 900,000

Self-hosted
  VPS 2,500/month x 36                      =  90,000
  Off-site backup 400/month x 36            =  14,400
  Setup 16 h x 1,500/h                      =  24,000
  Maintenance 3 h/month x 1,500/h x 36      = 162,000
  Incident allowance 16 h/year x 1,500 x 3  =  72,000
  Total                                     = 362,400

Under these assumptions self-hosting costs less than half. Now change the assumptions. With 5 users and no add-ons the SaaS total falls to about 144,000, and self-hosting at 362,400 loses clearly. The seat count and the value of your time decide the result.

What does the number miss?

• Reliability. A vendor's uptime and support are worth something. So is a person who knows how your system works, if that person leaves.
• Security. A good vendor patches faster than most small teams.
• Features. The hosted version may get features the self-hosted edition lacks, or the other way round.
• Lock-in and exit. Self-hosted software with open data formats is easier to leave.
• Opportunity cost. Time spent running servers is time not spent on your product.

How do you keep the comparison honest?

• Value your time. If it is free, you are fooling yourself.
• Use your own measurements for maintenance hours after a trial period.
• Ask a vendor for a quote at your three-year size, since list prices often drop with volume.
• Include the cost of a backup failure, in the form of a risk allowance.

The broader question of whether to do it at all is in is self-hosting worth it.