Why even longtime ERP users are abandoning custom software
Tramweigh Transport is a successful freight company. But Tramweigh Transport had a major problem…
(This example is fictional, but the challenges it highlights are very real)
For years, it relied on a custom-built ERP system tailored to its warehouse operations, fleet tracking, and invoicing workflows. For the most part, the system worked fairly well—but it came at a cost:
- Constant maintenance and new feature requests
- Scaling to new locations was slow and expensive
- It didn’t always integrate well with modern logistics tools
So when Tramweigh Transport discovered Axelifrate, a SaaS-based ERP designed for freight companies, the decision became clear:
- Lower upfront cost
- Built-in integrations with tracking and invoicing tools
- No more maintenance headaches
It wasn’t perfect—they lost a few custom features—but in the end, the benefits outweighed the downsides. Within six months, Tramweigh Transport discontinued its custom ERP and fully migrated to Axelifrate, the SaaS solution.
And Tramweigh Transport is not alone—far from it.
Businesses across industries are making the same choice, opting for scalable, cloud-based solutions over costly custom-built software.
This shift isn’t just about convenience—it’s changing the entire software industry. And small development firms are paying the price.
The death of custom software?
Surely one can see why SaaS is so dominant in this market: it’s scalable, requires no in-house maintenance, and offers fairly predictable costs.
Today, many companies prefer software-as-a-service over hiring developers to build custom tools—why?
Ryan Vice puts it simply in this 2021 Forbes article: SaaS is convenient because businesses “don’t have to worry about setup or maintenance” and benefit from “economies of scale.” A subscription fee grants access to a ready-made solution—maintenance, updates, and security are all handled externally.
The commoditization of software development
There was a time, not too long ago, when custom-built software was a premium service—companies would hire small (or large) firms to create specialized solutions because there were no viable alternatives.
Now? Most software needs have been commoditized:
Shopify, Monday, Salesforce, Workday or Miro are currently some of the most popular and most robust SaaS applications on the market.
But wait, what if none of those quite meet your needs? Great news: no-code/low-code tools now allow companies to build without much need for a developer—no muss, no fuss!
Admittedly, I’m oversimplifying here, but the fact of the matter is that not only is custom development no longer the first option—it might even be the last resort!
In fact, businesses are even sometimes willing to adapt their workflows to fit existing software rather than pay for custom development.
In other words, they’re willing to give up on certain non-critical features altogether just to enjoy the advantages of an established platform.
This puts smaller firms at an extreme disadvantage, forcing them into niche markets where demand is shrinking.
The problem for smaller development firms
Until fairly recently, small software firms mostly survived by building custom solutions for businesses. But why hire developers to build a bespoke product when a SaaS solution can cover 80% of your needs at a fraction of the cost?
And the data supports this: back in May 2024, Gartner projected “public cloud services” would grow by an additional 20% in 2024 reaching a total of $675.4 billion.
I don’t say this lightly—in fact, I want to be very clear here: I’ve been on the client side. I’ve seen firsthand how executives make these decisions throughout my career.
Cost-cutting isn’t just a factor—it’s often the primary objective. And as an unfortunate consequence, it’s incredibly difficult for local firms to compete when budgets are tight.
And right now—budgets are tight. They’re very, very tight.
Subscription fatigue—SaaS isn’t the silver bullet
While SaaS solves numerous problems, it’s also created a brand new one: subscription fatigue.
Companies—and even individuals—now pay for a host of monthly subscriptions, adding up to thousands per year in recurring costs. Businesses that may want to simplify their tech stacks might not be able to because they feel locked into SaaS. Indeed, switching away from a tech solution can be costly and highly impractical.
Is this good news for small firms though? Well, not really.
The AI disruption—traditional SaaS obsolescence is on the way
In fact, just when businesses got comfortable with SaaS, along came AI—and now even SaaS is starting to look outdated.
In his excellent article, The End of the SaaS Subscription Era: What Founders Need to Know Now (which I urge you to read), João Fernandes explains, “pay-per-task” models are rising in popularity, offering businesses the ability “to control costs based on actual usage rather than hypothetical need”.
Make no mistake, the insights delivered by these metrics will very much be AI-driven.
So now, the real question:
Will businesses build AI-powered tools in-house, or will they outsource AI development?
Could this be a lifeline for smaller development firms? Perhaps—if they pivot into AI consulting, integrations, or AI-powered SaaS alternatives.
Furthermore, while SaaS might be a no-brainer for many businesses, there are still cases where organizations will likely go the custom development route:
- Regulated industries require control and compliance
Finance, healthcare, and government sectors often require data residency and self-hosted solutions. In such cases, SaaS may simply not be an option for legal or ethical reasons. - The issue of content ownership and vendor lock-In
Even when SaaS providers let you retain IP rights, retrieving content in a usable format can be a major issue. Some businesses prefer to own their software outright to avoid this risk altogether. - Legacy system integration
In other cases, companies may not be able to move to a SaaS model because their operations are tied to legacy infrastructure that isn’t compatible with current market solutions.
That said, these exceptions are shrinking—even regulated industries are seeing SaaS providers adapt to compliance needs.
Naturally, larger organizations with complex projects, which require tailored solutions, security, and hosting, do tend to build custom applications. However, they typically turn to large, established development firms. More often than not, these businesses seek an end-to-end solution from a provider capable of handling their scale and operational demands.
Small firms in high-cost markets
The challenge is even greater for small development firms in high-cost markets, such as Geneva, my very own hometown, where outsourcing to lower-cost regions is increasingly common.
Why?
- Companies here often outsource across the border because it’s cheaper.
- Local pricing makes it nearly impossible to compete.
- Even if you offer an amazing custom solution and flawless service, many clients will still choose a more affordable provider elsewhere.
- Compliance with Swiss data protection regulations is often guaranteed, so that may not be a barrier.
When cost is the deciding factor, small firms in expensive markets are at an extreme disadvantage.
And as I stated earlier, this is something I’ve sadly witnessed time and time again over the course of my career.
Do small development firms have a future?
So what should small firms do? Give up? Throw in the towel?
No.
But let’s face it—any which way you look at it, small firms are losing ground.
A few years ago, SaaS changed the game. And now AI is changing it again.
It’s just the lay of the land and we have to adapt.
If you’re a small development firm today, the question isn’t just whether you can compete—it’s whether you can reinvent yourself fast enough to survive.
The good news is, with the right strategy and a swift response, I believe small development firms can absolutely survive in this market.
But look, there’s just no way to sugarcoat it: good luck keeping up with market demand one Clipper query at a time on MS-DOS.
Question for you:
Do you think small dev firms still have a role in today’s software market, or is SaaS snuffing them out completely?
Contact me to share your perspective—I’d love to hear from you, especially if you’re in the trenches figuring this out firsthand.
This post was co-written with ChatGPT to refine ideas, structure arguments, and enhance clarity.