I think 3 of this group is likely to be about as good or better than Saunders: Tillman, Gonzalez, Britton, Bundy, Matusz. Wada factors in too and provides extra depth.
Sure, everyone in that group (except Wada, who I don't think will be a factor) has higher upside than Saunders.
But none of them are as likely as he is to last an entire year in the rotation.
You're not buying good performance when signing Saunders. You're buying stability. You know he can go out there and throw 190-200 innings at a 95 or so ERA+. maybe even a tad better. He's unlikely to be a guy that you have to remove from the rotation. There is also enough uncertainty in the rest of the rotation - injury concerns for all, performance concerns for all except perhaps Hammel and even he is no true lock - that even if we sign Saunders, Matusz, Britton, Arrieta, and Bundy will likely all get their chances to make some starts. There is so much nearly guaranteed turmoil amongst our group of pitchers that the guys who are on the outside looking in on Opening Day will still have ample opportunity. The cream will have a chance to rise to the top, even if we sign Saunders. Signing him just makes it that much less likely that we end up with some sort of an abhorrence in the #4 and #5 spots. I want to compete this year, so I'm willing to place a premium on adding some stability even if it doesn't hand a spot or even an open competition for a spot to some of our young pitchers with godawful resumes thus far.
That said, Saunders is essentially indistinguishable from a small handful of other veteran free agent starting pitchers who were available this offseason, or through trade. So go out and get the one guy who can be had for the most reasonable deal. It's not Saunders we need, it's a reasonably priced, reliable, mediocre #4 starting pitcher.