The software-as-a-service market experiences rapid growth. By 2023, the SaaS sector is expected to reach $623 billion, showing an annual growth rate of 18%.
Indeed, cloud computing is beneficial for businesses in terms of reduced costs, scalability, security, and upgrades.
So if you have ever wondered how to build a SaaS product, you came to the right place. This article will take a closer look at the SaaS model and its key advantages. Also, based on our experience, we provide you with insights into SaaS application development to help you build a stable cloud business.
To be more specific, we will discuss the technology stack you should choose if you want to know how to build a SaaS app that can easily scale over time, how to choose the right development team, and define SaaS cost.
How to build a SaaS application with Syndicode
To showcase our expertise in software-as-a-service development, we will share a few words about Kinderlime, an educational management SaaS tool built by the Syndicode team.
Earlier, American schools lacked a reliable web solution that allowed parents to track their children’s activities. Instead, specialists used on-premise software downloaded to their computers. Such programs had a lot of bugs and flaws. Besides, the absence of a web version made the education management process very inconvenient.
The customer decided to overcome this issue and occupy the vacant niche by improving their existing digital product. Their previous daycare and after-school solution had high load issues, so they wondered how to build a SaaS product to replace the existing software.
Our team took on the project and solved issues with high load successfully. We were able to speed up the server response time. Apart from that, we also developed a completely new API for both the Kinderlime website and mobile application and added new features. They include an enrollment system, integration with the full-service payroll solution, Gusto, attendance reports, etc.
The solution allowed users to solve two important tasks: automate the paperwork and improve childcare. All vital documents, such as schedules, payments, and contacts, can be viewed in the intuitive dashboard. This way, parents stay connected and in control of their kid’s activities.
In 2019, Kinderlime was acquired by Procare Software, a trusted global leader in child care management solutions.
What do you need to know about SaaS products?
So what is software-as-a-service? Why is this licensing and delivery model getting more and more popular? And finally, how to build a SaaS application to run a successful and profitable subscription business? Let’s find out.
In a nutshell, the SaaS model implies delivering digital products to users via an internet connection for a monthly fee. Since the software providers host these products, users do not have to install the software on their local computers.
Check the infographic below to learn the key facts about the SaaS domain:
Types of SaaS
To define how to build a SaaS product that will resonate with your target audience, check out the main types of software-as-a-service on the market.
- Customer relationship management software or CRM for short. These products are designed to help businesses build connections with customers and improve their marketing strategies. A popular example is Hubspot.
- Billing and invoicing solutions. They simplify and automate accounting and financial processes in your organization. Zoho is one of the first SaaS billing tools that come to mind.
- Project management software. Solutions like Trello or Jira deal with task assignment, resource allocation, and project tracking and help companies manage workflow and collaborate with team members in the shared workspace.
- Vertical SaaS tools. These solutions are created for a particular industry. Alternatively, they can be designed to optimize certain business processes. We should also mention Veeva for pharmaceutical management, BioIQ for MedTech, or Guidewire for insurance.
- E-commerce software solutions. Online retailers need such products to manage products, inventory, shipping, and taxation. The most popular e-commerce software products are BigCommerce or Shopify.
If you wonder how to build a SaaS application for online retailers, you may take the Shopify platform as an example:
- Enterprise resource planning software or ERP. These are complex solutions that help big enterprises manage different business processes, including manufacturing, commerce, reporting, sales, supply chain, human resources, etc. The most well-known examples include Oracle Netsuite, Microsoft Dynamics 365, and SAP Business One.
- SaaS marketing tools. These instruments are used to help organizations execute their marketing strategies and campaigns and track the success of their business. They include analytics tools (Google Analytics), social media management platforms (HootSuite), SEO toolkits (SEMrush), etc.
- SaaS tools for remote collaboration. This SaaS product type embraces different kinds of solutions, as in cloud storage and file-sharing applications (Google Drive), time-tracking tools (Harvest), online chats (Slack), video conferencing instruments (Google Hangouts).
Take a look at Harvest to find out how to build a SaaS for time-tracking.
What makes a SaaS app a better option than a custom web solution?
The rise of software-as-a-service development can be easily explained by the clear benefits they bring both service providers and end-users.
Let’s discuss them in more detail to understand why more and more companies start wondering how to build a SaaS application to establish their cloud computing business.
- Reduced costs. When you build software users will need to install, you should take into account different operating systems and their versions, as well as various screen sizes and resolutions. You will need a lot of man-hours to make sure everything works as it should. The SaaS business model helps you avoid these hassles. You need to ensure the support of different web browsers only, and this task is much easier and cheaper.
- High adoption rates. In general, SaaS solutions have an easy learning curve, which results in a higher adoption rate. Besides, the ability to test the application during the trial period increases the level of engagement and, consequently, your profitability as a service provider.
- Recurring revenue. When it comes to other business models, you are constantly engaged in time-consuming and costly activities associated with expanding your customers base. With the SaaS model, things are completely different. Rather than paying a one-time payment for your software, users pay monthly fees. This way, you can predict your monthly and yearly revenue much easier.
- Seamless expansion to foreign markets. Adoption of the software-as-a-service business model frees you from the necessity to look for resellers that will help you with the distribution of your product. Since your product is an internet-based software solution, all you need to conquer new markets is an internet connection.
- Network efforts. The SaaS domain relies heavily on word-of-mouth marketing. The more users are satisfied with your product, the more potential customers you can get. They make decisions based on the recommendations of bloggers, influencers, and industry leaders.
How to build software as a service (Saas): Main Steps
Now let’s take a look at certain actions you should take if you wonder how to build a SaaS solution for your business.
1. Conduct market research and find your niche
2. Choose the most suitable revenue model
3. Define the primary functionality
4. Choose the right tech stack
5. Find a reliable SaaS development company
6. Build a SaaS app and test it
7. Take care of the after-launch maintenance and support
Step 1. Conduct market research
If it is done right, market research will help you to define how to build a SaaS product the right way. How so? The thing is that market analysis will allow you to learn more about the current state of your industry, target audience, and market rivals.
For example, an industry overview allows you to uncover the latest SaaS development trends you should be aware of. You will know about active implementation of artificial intelligence and the rise of micro SaaS and vertical SaaS products.
All this valuable data will help you answer a crucial question: how to build a SaaS product that will bring you a stable income and be truly valuable for your end-users.
Seth Godin, an American entrepreneur, author, and speaker, once said that you should not find customers for your product. Instead, you need to find products for your customers. We cannot help but agree with this statement.
Indeed, take a precise look at the consumers you want to reach and their pain points. Which solutions do they use to address them? What is its key functionality? What revenue models do your competitors use?
Proceeding from the strengths and weaknesses of your market rivals, you will define your competitive advantage much faster. Later, it will serve as a basis for your unique value proposition or UVP. A strong and clear unique value proposition will tell you how to build a SaaS solution that will help you become a disruptor in your specific domain.
Step 2. Choose the most suitable pricing model
How to build a SaaS application that will bring a stable income? To find the answer to this tricky question, you should choose the revenue model wisely. There are several reasons why setting the right price for your SaaS product is vital. They are as follows:
- Competitive advantage. The suitable revenue model enables you to stand out from competitors with similar offerings.
- The ability to offer true value. Customers want to make purchases that can be easily justified. By setting an adequate price for your cloud solution, i.e., the price customers are willing to pay, you focus on the value of your product rather than the business costs or revenue model adopted by market rivals.
- Strengthening of your unit economics. If you want to know how to build a SaaS application that will help you grow your cloud business, keep in mind two metrics that define the success of your SaaS business. These are customer acquisition cost or CAC and customer lifetime value or LTV. To grow your business, you should make LTV higher than CAC. With proper SaaS pricing, CAC is getting lower owing to better positioning. Lifetime value, on the contrary, is increased due to better customer retention.
When choosing the right monetization model, you need to find the proper balance between the value you want to offer to your customers and profit.
Look at this challenge this way. You build a SaaS product to help customers solve their issues. Sure enough, you want to get adequate compensation for this help. You need the right balance if you wonder how to build a saas product that will win the market.
So let’s take a look at the most popular SaaS pricing models:
- Per-user pricing. This model is common for team-based products such as CRMs, project management tools, etc. It implies charging customers based on the number of employees using the solution.
- Tiered pricing. If your SaaS solution has more than one use, you can offer several packages with different features at different prices. This way, you can grow your revenue by offering your product to multiple buyer personas. Besides, the model enables customers to choose the most appropriate solution for their needs.
- Per storage pricing. This model is pretty simple. Customers pay the cost based on the amount of storage they need. You may offer a certain amount of storage for free and paid packages for customers who have reached their limit.
- Feature-based pricing. With this model, the features available for customers define the price of your cloud product. This option gives them clear motivation to upgrade their packages. This way, they get access to the additional functionality they need.
- Pay as you go. Here the price for your product varies based on the frequency of its usage. The more sought-after the SaaS product is, the higher revenue you will get.
- Subscription. It is the most transparent model. You offer only one product with a specific set of features for a certain price.
- Freemium. With this model, customers get some functionality for free. At the same time, advanced features are available in paid packages.
- Ads supported pricing. This pricing model is similar to the previous one. However, you get revenue from advertisements rather than paid features.
Step 3. Select features of the SaaS product
A good way to get the upper hand in the SaaS business is to provide users with features that cannot be found in similar products.
Conduct the competitive analysis to define the functionality that customers would like to have and build them earlier than your market rivals.
This way, you increase your chances to become an industry leader with innovative breakthrough SaaS products.
Speaking about features, we recommend dividing them into two categories: must-have and additional.
The functionality you need to implement depends on the type of SaaS app you are going to build. For example, if you want to build a video conferencing tool, you should offer users screen sharing, chat and messaging, unlimited recording, and HD video capabilities.
For starters, choose a few core features to build version 1.0 of your product. This way, you will test the feasibility of your business idea and find out how to build a SaaS application in the most efficient and cost-effective way.
Remember that you can always improve your product by adding new features after getting the reaction from early adopters.
Step 4. Choose the right technology stack
After defining both must-haves and additional features for your SaaS product, you need to choose the right technologies to implement them. So if you wonder how to build a SaaS product that will be able to scale and handle an increasing number of concurrent users, choose the tech stack wisely.
The number of technologies is growing day by day, so it is really hard to choose the most suitable ones that will allow the SaaS application development team to build a reliable, scalable, and secure solution.
To make things easier for you, we will discuss the web development technologies we use at Syndicode for SaaS product development.
- Back-end. The back-end technologies include programming languages, frameworks, libraries, and other tools required for building a server-side of a SaaS app. The back-end is responsible for storing and organizing data, web app architecture, and scripting. To build dynamic and reliable SaaS applications, choose proven frameworks such as Node.js, Django, or Ruby on Rails. At Syndicode, RoR is our ultimate choice. This framework has lots of ready solutions, so our developers do not have to build new functionality from scratch. This way, Ruby on Rails speeds up the software development process and, consequently, reduces the cost of a completed solution. Finally, this framework is well suited for the projects that should be scaled over time to meet evolving customers’ needs.
- Front-end. The term front-end refers to buttons, menus, links, graphics, and other web page elements users interact with. For building graphic interfaces of SaaS products, we use advanced technologies like Angular.js, React.js, and Vue.js. Each of these frameworks has specific attributes that help them meet the key SaaS requirements. Thus, React has many reusable components and a number of design and debugging tools. Angular is noted for its enhanced security, which is especially important when it comes to storing sensitive data in the cloud. Finally, Vue also comes with an extensive set of helpful tools and simplifies the integration of SaaS tools with third-party services.
- Databases. PostgreSQL is used as the primary data store for all SaaS applications we deliver. Apart from that, we use MySQ and Redis, which is an in-memory data structure store.
- Hosting and infrastructure. Speaking about the cloud hosting providers, we opt for Amazon Web Services (AWS). In addition, Digital Ocean allows our software developers to deploy and scale software-as-a-service applications that run simultaneously on many devices. Among other services used by our development team, we should mention Azure, Heroku, and GCP.
Step 5. Choose the right SaaS product development team
If you wonder how to build a SaaS app and not fail, you should give consideration to the software development specialists that will build a SaaS product for you.
Basically, you have three available options. These are as follows:
This option will work for you if you wonder how to build a SaaS in the most cost-effective way. However, we should mention that this approach is the least reliable one. It may happen that the quality of services of a particular specialist is far from satisfactory. In this case, you will have to spend time and money on rework.
Creating an in-house development team
This option gives you full control over the SaaS development process. However, we should mention certain expenses that make maintenance of your in-house software development team a rather expensive venture. They are software licensing, hardware, taxes, salaries, and compensation.
Outsourcing your SaaS project to a software development company
Wonder why you should outsource SaaS development services? The thing is that the partnership with a software development agency will save you from the operating expenses we mentioned above. In return, you will get an experienced team of highly qualified software-as-a-service developers, UX/UI designers, quality assurance engineers, and project managers that will deliver a reliable SaaS product for you. Based on their experience, they make sure that your cloud solution is compliant with the key standards of your industry and tailored to your specific business needs.
At Syndicode, we have been building SaaS applications for more than six years. Our portfolio contains many SaaS projects that we successfully delivered to our customers. All of them have different complexity and vary from marketing tools to a complex SaaS platform for education management that we have mentioned at the very beginning of this article.
Feel free to check our case studies
Step 6. Build your SaaS product
We have come to the most exciting and complicated part, which implies the actual building of your SaaS product. Here we should mention the main SaaS development process stages such as discovery session, UX/UI design, development, quality assurance testing, and deployment.
Now let’s discuss each stage in more detail:
To start with, we would recommend holding a discovery session with the software development company. This way, the development team will explore your subject area, specific project requirements, functionality, and potential bottlenecks.
Based on this information, they will be able to define the project scope properly and provide you with accurate time and cost estimates.
When the discovery session is complete, the UX/UI design team will take on your project. For a start, they will create wireframes and clickable prototypes that later will be transformed into UI design.
As soon as you review and approve the final version of the UI design, developers will proceed to build your SaaS product. At first, they will create a so-called version 1.0 with one or two key features. This way, you will be able to present your product to the target audience much faster.
After getting feedback from pioneer users, you will know what features should be added/modified/removed to satisfy customers’ demands.
Before deploying the written code, all the data, and components to production, quality assurance engineers should perform manual and automated tests to ensure that each product feature works as it should and the system does not have any bugs or glitches.
If the solution passes all tests successfully, it can go live. In other words, it becomes accessible for both search engines and real users who are looking for products or services you offer.
Estimate of SaaS product development
Cost of SaaS app development
Based on our experience in SaaS app development, we can say for sure that the cost of building your cloud web solution starts with $80,000-90,000. Here we talk about version 1.0. The price of a completed SaaS solution includes business analysis, UX/UI design, software development, and quality assurance costs. As for the fully featured cloud version, it will cost you $200,000-250,000.
However, we want to make it a point that these are ballpark estimates. The final SaaS app development depends on your unique project requirements.
What can affect the SaaS application development cost?
To sum up, let’s briefly discuss the key factors that have the greatest impact on SaaS cost.
- The project complexity. The more sophisticated functionality you want to implement, the more time developers will require to build these specific features. Consequently, the cost of their services will be higher.
- The number of third-party integrations. Integration of your SaaS product with some other service, be it a payment gateway like PayPal or a web mapping platform like Google Maps, needs a lot of time, expertise, and effort. For this reason, the number of third-party integrations has a significant impact on the SaaS cost.
- Development approach. We have already mentioned that hiring freelance developers is the most cost-effective solution, whereas creating an in-house development team can be rather costly. In this case, a partnership with a software development agency is the best way to save on SaaS development and get a high-quality product.
- Hourly rates of the SaaS app development team. Traditionally, they depend on the location of the software development partner. Thus, developers from North America and Western Europe set higher rates than their counterparts from Eastern Europe, let’s say Ukraine.
The infographic below shows how SaaS development changes depending on geographic location:
We hope that this guide answers your question of how to build a SaaS product in the most efficient and cost-effective way.
If you need an experienced software development team to help you translate your ideas into a profitable SaaS product, we are here to help. We have built multiple cloud solutions for different domains. It means we know how to build a SaaS solution that meets the most demanding business requirements.
There are several reasons why SaaS application development services are so sought-after these days. First, it allows companies to save on hardware and software. Second, organizations no longer need to take care of the updates. They will always have the latest version of software offered by the service provider. The third reason is accessibility. With SaaS development, customers got the freedom of accessing the applications from anywhere, provided this place has an internet connection. The same goes for devices. Users can freely switch gadgets, and they will not have any issues with assessing the required app. The last benefit of SaaS platform development is enhanced security. Cloud service providers adopt the latest security practices to safeguard the sensitive information of their customers.
There are several ways to reduce software as a service development cost. The first one is to launch version 1.0 with minimum functionality before moving to the development of a fully fledged product. With this approach, you do not have to invest in building an extensive feature set. On the contrary, you start with one or two key features that will help customers understand what your SaaS product is about. After getting initial feedback from pioneer users, you can improve your product by adding new functionality. The second way to save on SaaS development is to outsource your project to a reliable software development partner. This option will be less expensive than creating your in-house software development team and more reliable than hiring freelance developers.
If you wonder how to build a SaaS application, take the following steps. First, conduct market research. To be more specific, learn more about your industry, the most significant competitors, and the target audience. Armed with this information, you will understand how to build a SaaS solution that will stand out from market rivals. Then, choose the right revenue model. Simply put, decide how you will charge users for accessing your application. After that, select the primary and secondary functionality based on the type of software-as-a-service app you want to build. Then, choose the right technology stack to implement these features and find a reliable company to create a SaaS application.
The short answer: it depends. The number of specialists in the dedicated development team is defined by the features you want to implement and their complexity. However, the standard team who will create software-as-a-service for you will include the following specialists: a business analyst who will explore your SaaS business idea and your business requirements, and a software development team lead who will create user stories and offer technical solutions for potential bottlenecks. Also, you will need a UX/UI designer who will show you how your application will look and function. The back-end and front-end developers will build the server-side and graphic interfaces. Quality assurance engineers will test your software to ensure it works properly and does not have any bugs. Finally, you will need a project manager to work between you and the development team. This specialist will keep you updated about the current state of your SaaS development project.