Over the past 5 years, the software-as-a-service market has been experiencing rapid growth, and this trend is expected to continue. Just imagine: over this period, the number of venture investments in SaaS startups has more than doubled, and in 2023 it amounted to 47% from all the volume!
But supply is always only a humble follower of demand: end users spend more on SaaS than any other cloud service, accounting for more than 35% of the total IT enterprise budget (Gartner).
Why is SaaS development becoming popular, and why exactly do these applications deserve the love of their users? Let’s reveal all the advantages and stages of SaaS application development in this article and discuss the cost and challenges accompanying this path further.
What is SaaS?
SaaS, or Software as a Service, refers to a software delivery model where web applications are hosted by a provider and made available to users over the internet, typically through a web browser or mobile app.
We might mention, the idea of “the cloud” is closely related to SaaS, but it is not an absolute feature for all SaaS platform development. Some of them may have a hybrid architecture, where some functionality and data reside on the provider’s servers, while other parts are located on the user’s local devices. This depends on the specific requirements and characteristics of the application.
“The key difference is that with SaaS, the user doesn’t have to worry about things like software installation, updates, maintenance, or data storage. The provider handles all of that, and the user simply pays a subscription fee to access the software they need.”
Ilia Kiselevich, CEO at SolveIt
Types of SaaS applications
SaaS applications span a diverse range of functionalities, catering to the needs of businesses and individuals across various domains. All of them can be classified into 8 common types:
1. Productivity and collaboration tools: These include cloud-based word processors, spreadsheets, presentation software, project management tools, and communication/messaging platforms.
Examples: Google Workspace, Dropbox, Slack, and Trello.
2. Customer relationship management (CRM) Software: SaaS CRM solutions allow businesses to manage their sales pipelines, customer data, and interactions in the cloud.
Examples: Salesforce, HubSpot, and Zoho CRM.
3. Enterprise resource planning (ERP) systems: SaaS ERP platforms integrate a company’s core business processes like accounting, human resources, and inventory management.
Examples: NetSuite, Workday, and SAP S/4HANA Cloud.
4. Content management systems (CMS): These cloud-based SaaS platforms allow users to create, manage, and publish digital content without extensive technical knowledge.
Examples: WordPress, Squarespace, and Wix.
5. Human resources management: SaaS HR tools handle employee onboarding, payroll, benefits administration, and performance tracking.
Examples: Zenefits, Gusto, and BambooHR.
6. Business intelligence and analytics: These SaaS offerings provide data visualization, reporting, and advanced analytics capabilities.
Examples: Tableau, Power BI, and Qlik Sense.
7. Billing and invoicing tools: SaaS-based solutions for automating recurring billing, sending professional invoices, and managing payments.
Examples: Stripe, Klarna, and Recurly.
8. Industry-specific applications: Vertical-focused SaaS solutions cater to the unique needs of particular sectors, such as healthcare, e-commerce, real estate, or education.
Examples: Veeva for life sciences, Yardi for property management, and Shopify for online marketplaces.
SaaS app development is primarily more prevalent in the B2B domain — that’s explained by the fact that businesses have more complex and specialized needs that require robust, scalable, and feature-rich software solutions, unlike individuals.
Why do users love SaaS apps?
To understand why this relatively young technology has become a phenomenon so quickly, it is enough to compare SaaS apps with taxi services.
Uber or Bolt have advantages over outright car ownership, providing the client with convenience and quick decision-making. With this, the taxi service company handles the responsibilities of maintenance, insurance, parking, and repairs, freeing the user from those burdens.
Similarly, SaaS vendors offer advantages over licensed software by reducing the technical overhead by managing SaaS platform development and maintenance. So, the benefits for users are:
- Low entry threshold. Users can quickly try out the SaaS application at no cost due to a free trial to evaluate if it meets the needs of their business and make an informed decision.
- High security. The SaaS provider handles all the data protection and cybersecurity measures, ensuring compliance with industry regulations. The cloud nature of the solution involves automatic backups.
- Affordable budgeting. SaaS applications typically have flexible, subscription-based pricing that is more cost-effective than purchasing licensed software. This makes them accessible for SMBs.
- Automatic updates. Users always have access to the latest version of the software without having to manually download and install updates, which are pushed seamlessly with no disrupting operations.
- Tailored offering. SaaS apps can easily scale up or down to accommodate changes in the user’s business needs, eliminating functionality or expanding it on-demand, fitting businesses of all sizes.
- Reduced operational costs. Users don’t have to invest in hardware, IT infrastructure, expert human resources, testing, or maintenance, as the SaaS provider handles these responsibilities.
“Of course, all these advantages do not exclude the need for data migration, user adoption, and the integration of third-party services. And yet, these are compelling arguments in favor of SaaS app development as a business owner, as it ensures the market’s interest.”
Ilia Kiselevich, CEO at SolveIt
Benefits of SaaS development
A successful software-as-a-service app must combine innovative technologies, deep market/users understanding, and an unwavering focus on commercial success.
If the benefits for users are clear, let’s uncover the benefits SaaS development brings to startup founders as a model itself:
Recurring revenue
The key advantage of SaaS platform development for the owner is receiving stable, predictable monthly or annual payments from clients. This provides a more reliable cash flow compared to one-time sales of traditional software.
By deeply understanding each industry’s market dynamics and seasonality patterns, you have the ability to forecast the splash of subscription purchases and customer growth. F.i., companies serving the accounting industry tend to experience higher signups and renewals during Q1 and Q4. Isn’t that the best way to tailor your financial strategy?
Ease of deployment
The primary advantage of SaaS development over traditional software is the reduced cost and time required to deliver the solution to the target market. Bringing the product to the end user enables vendors to start generating revenue faster.
Also, for providers, the ability to centrally fix, update, and deploy offerings in the cloud also reduces software maintenance costs. This allows them to easily offer value-added services, like cloud analytics, etc., which would be difficult to provision with on-premise software.
Scalability
The cloud-native architecture of SaaS platform development also facilitates easy integration with a wide range of third-party solutions.
Through the use of well-documented existing APIs, SaaS vendors can seamlessly incorporate additional functionalities into their core offering. This allows them to leverage best-of-breed features that satisfy fluctuating industry demands with no need to develop them from scratch, which also leads us back to the question of cost effectiveness.
SaaS app development process: 8 steps for success
A competent SaaS app go-live requires a well-planned and carefully executed approach. To ensure the success of your startup venture, it is crucial to navigate the key steps in the SaaS app development process with expert guidance. Commonly, it consists of the next steps.
Step 1: Market research and idea validation
This discovery stage involves analyzing the target market and competitors, identifying user needs and their personas, and validating the core product idea. The goal is to gather insights to inform the SaaS application development process and ensure the solution addresses a real problem.
Expert tip: Conduct a “smoke test” by creating a simple landing page for your MVP idea and driving traffic to it. Measure conversion metrics to validate initial interest before investing heavily in development.
Step 2: Defining project scop
In this stage, you’ll define the core functionality and key features of your minimum viable product (MVP). This involves features prioritization based on user needs and business objectives by outlining specific user stories that will make your SaaS app authentic, and meeting their acceptance criteria.
Expert tip: Wireframes or low-fidelity prototypes help you reproduce detailed user stories. If some of the features are aside from the user flow, you’ll be able to effectively define the prioritized backlog.
Step 3: UI/UX design
For SaaS software, the focus shifts towards creating experiences that are intuitive, efficient, and accessible. Simplicity is key, as the UI must guide seamlessly through the app’s core functionality. This stage includes development of the high-fidelity prototypes and a design system.
Expert tip: One of the prominent SaaS app development trends for 2024 is the rise of mobile-first design, as more users seek to access the solution on-the-go, so keep this aspect in mind for post-MVP iterations and choose a tech stack wisely.
Step 4: Choosing a monetization model
Defining the appropriate revenue generation model — whether freemium, subscription, usage-based, or a hybrid approach — is critical for the long-term sustainability of a SaaS product. The chosen option can give the startup a competitive advantage and facilitate faster user acquisition and adoption.
Expert tip: To arrive at the optimal pricing policy, product SaaS teams can use A/B testing. Benchmarking competitor monetization also helps to identify the shortcomings or adopt and improve upon the best practices.
Step 5: Defining the tech stack
This stage involves key considerations on the frontend and backend frameworks, cloud platforms or services, and CI/CD tools that will be leveraged for SaaS app development. This decision lays the foundation for the architecture, scalability, and long-term maintainability of the product.
Expert tip: Prioritize proven technologies that have a track record of powering successful SaaS products. Reliable options often include Node.js for the backend, React for the web development of the frontend, and industry-leading cloud platforms like AWS, Azure, etc.
Step 6: MVP development
The primary objective to build an MVP is validating the core functionality and gathering user and stakeholder/investor feedback. As such, the focus should be on delivering a testable product quickly and efficiently, rather than implementing an extensive feature set upfront.
Expert tip: Resist the temptation to overbuild or add unnecessary complexity upfront. A reliable SaaS application development company will help you define a clear product vision and roadmap that aligns with your business objectives.
Step 7: Testing and getting feedback
SaaS apps must work seamlessly across different web browsers, OSes, and devices. They may handle sensitive customer data, and the user base will only continue to grow. That’s why load, stress, and compatibility testing are essential. API integrations also have to be covered.
Expert tip: Implement a structured feedback loop to continuously improve the product based on user insights. This can involve user surveys, one-on-one interviews, and close collaboration with early adopters.
Step 8: Product scaling
Once the MVP has been validated and testing has revealed any issues, direct forces are directed toward scaling the product — adding new features, improving the infrastructure, and optimizing the UX. The goal is to turn the MVP into a fully-fledged SaaS app that can meet the growing user demands.
Expert tip: Ensure the app can handle increased user traffic and data volumes without compromising performance or stability. Work closely with your SaaS development partner to identify and address any scalability bottlenecks in the system.
Having a reliable technology partner to guide you through each stage of SaaS app development can make all the difference. With their expertise and support, you can ensure your app not only launches successfully, but continues to grow and thrive in the long run.
Top 3 challenges of SaaS app development
Like any type of software, the development of SaaS platforms comes with its own unique set of considerations. We touched on this a bit when discussing the testing phase — the fact is, QA services are absolutely vital for these sorts of projects. These 3 key challenges we outlined really drive home why that’s the case:
Challenge 1: Data security and privacy
When developing a SaaS app, it is crucial to carefully plan and implement measures to protect user data. This includes encrypting data, enforcing the principle of least privilege, and regularly conducting security audits.
For a startup utilizing SaaS app development and UX/UI design services, it is important to ensure that the contractor has the necessary experience and tools to maintain a high level of security.
Challenge 2: Scalability and fault tolerance
SaaS apps must be capable of quickly scaling to handle growing numbers of users and data. Additionally, they must be fault-tolerant to ensure high availability for users. This requires meticulous application architecture design and the selection of appropriate technologies.
If you are hiring a dedicated development team for your SaaS project, it is important to verify that they have experience in designing highly scalable and fault-tolerant systems.
Challenge 3: Integration with other systems
For a startup leveraging an outsourced development partner, having a contractor with proven experience in this area is really important. They need to have a solid grasp of modern API standards and integration architectures to be able to deliver integration capabilities that are both robust and flexible.
Trying to tackle complex third-party connections without that specialized knowledge can lead to a lot of headaches down the line.
Cost of Saas application development
SaaS app development requires a significant investment, both in the initial build and ongoing operations.
“As a general estimate, the initial development of a basic SaaS application can range from $25,000 to $250,000+, depending on the complexity. Ongoing maintenance and hosting costs are typically 15–30% of the initial cost per year. However, the actual cost can vary widely based on the specific requirements of the SaaS platform.”
Ilia Kiselevich, CEO at SolveIt
Let’s take a closer look at the key cost considerations for two common scenarios — building an SaaS MVP versus a full-featured SaaS product.
SaaS MVP app development
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Read the blog post to learn how much does it cost to build SaaS startup app — VP or full-featured — here.
