AI & Strategy

AI Build vs Buy Break-Even Calculator

Calculate the exact financial break-even point where in-house AI engineering beats commercial LLM API SaaS subscription costs over multi-year horizons.

Read Companion Article on LinkedIn ↗ Open in Google Sheets ↗ Download Excel (.xlsx) ↓
Build Parameters
6 devs
$150,000
2 PMs
$95,000
6 months
Empirical IT schedule and budget slippage risk multiplier.
1 FTEs
$135,980
$0
Buy Parameters
Expected monthly prompt invocations or API requests.
Vendor API model tier rate card for prompt execution.
2,000 tokens
500 tokens
0%
0%
$500
Timeline & Horizon
36 months
Decision Verdict Primary Decision Gate
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Break-Even Crossover
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Break-Even Monthly Volume
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Total Build Investment
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Net Monthly Operational Savings
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Unit Cost Multiplier (Buy vs Build)
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Why I Built This: The Hidden Payroll of "Free" In-House Software

In enterprise architecture, teams often justify building custom in-house software or self-hosted AI pipelines by comparing server bills directly against vendor SaaS license quotes. They overlook the real expense: ongoing maintenance engineering payroll.

This calculator calculates the true break-even volume by factoring in fully loaded engineering salaries, maintenance headcount, schedule overrun risks, and serverless compute floors.

Architectural Assumptions & Mechanics

  1. Fully Loaded Payroll: Base engineering salaries are loaded at 1.4445x using U.S. Bureau of Labor Statistics (BLS) ECEC data to capture benefits, taxes, and overhead.
  2. Schedule Slippage Reality: Software projects frequently exceed initial timelines. The model defaults to 1.00x with 1.27x mean industry overrun and 3.00x tail risk options based on empirical research (Bent Flyvbjerg).
  3. Maintenance Floor: Maintenance is modeled in real engineering headcount (FTEs). Even a single dedicated maintenance engineer creates a significant ongoing payroll baseline.
  4. API Rate Cards: Vendor costs reflect current enterprise LLM token pricing (Anthropic Claude rate cards) with prompt caching and batch execution discounts.
  5. Serverless Unit Costs: Internal execution costs are modeled at an AWS serverless baseline floor of $0.00000128 per transaction.
  6. The Break-Even Threshold: At low or moderate transaction volume, maintenance payroll alone usually dwarfs third-party API invoices. Custom builds only yield positive ROI once transaction volume scales past the calculated break-even point.