Automating the hiring process is not just a trend—it’s a necessity. Companies realize that without an ATS (Applicant Tracking System), hiring effectively becomes almost impossible. However, many HR leaders face a big question: should they build their own ATS from scratch or use an existing solution?

I often see my clients struggle with this decision. In this article, we will break down what it really costs to develop a custom ATS and compare it to using a ready-made solution.

Building Your Own ATS: Costs and Challenges

The idea of creating your own ATS might seem appealing. You get full control over the system, and it can be tailored to fit your company’s needs. However, the reality is that developing an ATS is not just an IT project—it’s a long-term investment requiring significant resources.

The first step is forming a development team. To create a minimum viable product (MVP), you will need:

• Backend developers (2-3 people, $4,000+ per month each): Responsible for building the system’s core infrastructure, data storage, security, and integrations with external services.

• Frontend developers (2 people, $3,500+ per month each): Develop the user interface to ensure a smooth and intuitive experience for recruiters.

• UX/UI designer (1 person, $3,000+ per month): Ensures the interface is user-friendly and efficient.

• Product manager (1 person, $5,000+ per month): Manages the development process and aligns technical execution with business needs.

• Project manager (1 person, $4,000+ per month): Coordinates team efforts, monitors deadlines, and ensures smooth execution.

• QA engineers (1-2 people, $3,500+ per month each): Test the system’s functionality before each release.

• DevOps engineer (1 person, $4,500+ per month): Handles system deployment, server performance monitoring, and security.

The monthly payroll for such a team starts at $40,000. The development process can take anywhere from 1.5 to 3 years, depending on the complexity of the project.

Additional Risks of Developing Your Own ATS

Beyond high costs, there are other risks:

• Team instability: Some outsourcing and outstaffing companies try to develop ATS solutions using employees who are currently “on the bench.” At first, this seems like a smart move—since salaries are already being paid. However, as soon as a more critical client project arises, these developers are pulled away, slowing or even stopping ATS development. As a result, the project can take years, and new developers who join later must work through legacy code, making further updates and maintenance more difficult.

• Technology limitations: Even if your team builds a working ATS, it will require constant updates to stay effective. Outdated technology can make your system inefficient over time.

• Scalability issues: The initial design may seem complete, but as your business grows, you’ll need additional integrations, new modules, and ongoing improvements—leading to additional expenses.

• Slow implementation: Competitors using established ATS platforms may gain an advantage while you’re still developing your system.

• Legal and compliance challenges: Your ATS must comply with regulations such as GDPR, CCPA, and others, which require additional expenses for legal audits and compliance management.

Hybrid Approach: Customizing a Ready-Made Solution

Companies that need customized features but don’t want to build an ATS from scratch can opt for a hybrid approach—using an existing ATS and tailoring it to their needs. Many platforms allow you to:

• Integrate with HRM and CRM systems.

• Add custom candidate evaluation algorithms.

• Develop unique reports and analytics.

This approach reduces development and maintenance costs while still allowing customization.

Some open-source systems, like SAP SF and Oracle HCM, offer licensing options that allow companies to modify their software while still receiving vendor support and updates. This lets businesses avoid the risks of building an ATS from scratch while maintaining customization options: companies can integrate additional features, tailor workflows to their specific needs, and maintain ownership over crucial processes.

Furthermore, these platforms are regularly updated by their providers, ensuring compliance with the latest industry standards and security measures. This approach allows organizations to avoid many of the risks associated with developing an ATS from scratch while benefiting from a scalable and well-maintained foundation.

Cost Analysis for Different Business Types

• Startups and small businesses: Usually choose ready-made solutions because building an ATS requires a massive investment that may not be practical.

• Mid-sized companies: Often opt for a hybrid solution, modifying existing platforms to fit their needs.

• Large corporations: Can afford to develop a custom ATS but often still rely on a combination of customized and ready-made solutions.

When Will an ATS Investment Pay Off?

Building an ATS requires at least $800,000, and the return on investment (ROI) is typically seen in 3 to 5 years. However, the risk is that by the time the system starts delivering value, it may already be outdated. On the other hand, ready-made solutions can deliver results within months.

Comparing Costs: Custom ATS vs. Ready-Made ATS

What’s the Best Choice?

The decision depends on company size, goals, and available resources. While large corporations may afford custom development, even they often find that customizing a ready-made ATS is more cost-effective. Companies that need a fast, affordable, and flexible solution should focus on ready-made ATS platforms with customization options.

Choosing the right ATS is a strategic decision. The right system will help HR teams work more efficiently without spending excessive resources on software development and maintenance.