SaaS Development: In-Depth Guide For Founders

This article covers SaaS development from the founder’s perspective, including technical and non-technical requisites, lifecycle, cost, challenges, etc.

May 27, 2022
11 mins read
Last Updated May 27, 2022
SaaS-Development-Startup-Founders-Guide

SaaS Development: In-Depth Guide For Founders

What does Netflix, Spotify, Trello, Buffer, Hubspot and Dropbox have in common? All of them are some of the most celebrated SaaS products of the decade.

These super-successful Saas-based startups indicate that the future belongs to the SaaS delivery model. And if you’re looking to launch your startup shortly, you should consider SaaS as the average number of SaaS apps used in 2021 was 110. Not just that, the SaaS market is estimated to become a $208 billion entity by 2023.

However, the next-gen founders and co-founders are plagued with questions like – how to build a SaaS application? What things to keep in mind? What steps to follow? This article aims to answer these questions as we take you through the nitty-gritty and nuances of developing SaaS applications.

Capture the users imagination by delivering delightful, and platform-agnostic digital experiences through our SaaS development services. Connect with our seasoned professionals who will transform and grow your SaaS business by leaps and bounds through tailor-made solutions.

What is a SaaS development?

SaaS (Software as a Service) is a software licensing and delivery model where you host the application on the cloud. The software is licensed on a subscription model, accessible to users through the internet anywhere and in any time zone without installing it.

Here are some of the key differences between a SaaS product and a standard software product:

SaaS-vs-Traditional-Software

What is SaaS application development?

SaaS application development is the process of developing and delivering software or a product that aims to solve a specific problem for targeted customers.

But before going into the core details of the SaaS development life cycle, you need to be aware of technical and non-technical considerations. The upcoming section will put a light on these aspects.

Things to consider before developing a SaaS application

1. Technical considerations

a.) SaaS architecture

Choosing and creating exemplary SaaS architecture is one of the most critical aspects of the SaaS development process. That is because architecture affects the type of operation, scaling capabilities, and business benefits. So, carefully design your software architecture and take help from the solution architects who have the skill and experience to solve a complex problem.

Here are some popular types of SaaS architectures that one can choose from:

Type of Architecture Pros Cons
Monolithic
  • Easy to monitor
  • Straightforward testing
  • Difficult to scale
  • Technology barriers
Microservice
  • Resource and time-friendly
  • Enhanced scalability
  • Cross-cutting issues
  • Testing problems
Single-tenant
  • High-end security
  • Customization is easy
  • Plenty of resources to manage
  • Maintenance is costly
Multi-tenant
  • Pocket-friendly
  • Easy integration
  • Hard to customize
  • Plenty of loopholes

b.) Tech stack

The next task in SaaS app development is to pick the right tech stack for your application. The tech stack comprises programming languages, server technology, database, cloud hosting provider, CDN (Content Delivery Network), etc. Here is the most commonly utilized tech stack for SaaS applications:

Back-End Front-End
Web Server:Nginx, Apache Tomcat, MS IIS Libraries:Vue.js, React
Framework:Laravel, Codeignitor Languages:HTML, CSS, JS
Programming Language:Python, Java, PHP Mobile Framework:React Native, Flutter, Swift, Kotlin
Database:MySQL, PostgreSQL, Redis, MongoDB
Cloud Hosting:AWS, Azure, GCP
CDN:Amazon Cloudfront, Cloudflare, Rackspace

Here are some critical components of a tech stack that must be chosen wisely to develop a successful SaaS application:

Programming language: Always look for modern, simple, and powerful language. Java and PHP are popular, but Python has taken over them recently. Although, everything boils down to the business needs at the end of the day.

Database: Appropriate database allows faster access and sets the base for higher scaling and lower latency. It’s suggested to opt for a No-SQL and document-oriented or serverless database over relational databases. MongoDB, PostgreSQL, Redis, etc., are some of the popular databases for SaaS applications.

Queuing system: Communication protocol or queuing system helps SaaS applications send and receive messages through third-party API or servers. RabbitMQ, Apache Kafka, IBM MQ, Azure Scheduler, etc., are some of the most popular ones you can utilize.

Web server: The right web server technology ensures availability, reliability, and high performance to SaaS applications. Nginx, Apache Tomcat, MS IIS, etc., are famous web servers.

Cloud hosting: An application’s ability to scale, upgrade, uptime, security, disaster recovery, etc., depends on the cloud hosting provider. As an Advanced Consulting Partner of AWS, Simform always recommends building SaaS applications over AWS. Though other popular options are Azure, and Google Cloud Platform (GCP).

Tech stack used by successful SaaS companies:

1. Pinterest

Growth Stage Tech Stack
Product/Market Fit Python, MySQL, Node.js, Redis, Memcache, Nginx, RabbitMQ, MongoDB, Amazon EC2, Amazon S3, Amazon Cloudfront
Hyperscale HBase, Thrift, Kafka, AWS ELB, Varnish, Amazon Redshift, React, Flask, JavaScript
Growth & Maturity Docker, Jenkins, Kafka Streams, Tensorflow, Bazel, Kubernetes, Teletraan

[Source]

2. Uber

Growth Stage Tech Stack
Product/Market Fit Python, MySQL, Node.js, Redis, MongoDB, Backbone.js, Objective-C, Java, PostgreSQL, Kafka, Hadoop, Elasticsearch
Hyperscale Docker, Mesos, Aurora, Thrift, Presto, Appium, Spark, Hive
Growth & Maturity Nginx, HAProxy, Gradle, Swift, Cassandra, Tensorflow

[Source]

Key takeaways:

  • The tech stack keeps on changing with time as the product moves from one growth stage to another. That’s why building an evolutionary architecture is a must.
  • Each growth stage has its specific requirements, and to support those requirements, you need to evolve the tech stack.
  • Also, as the products grow, you need to shift to the latest technologies and tools as it has greater chances of new security updates and new-age functions.
  • Therefore, there can’t be a one-size-fits-all approach to the tech stack. Each product has its unique requirements and target audience. Choose the tech stack considering all these points.

c.) Third-party integrations

Third-party integrations increases SaaS product’s marketability as they allow users to integrate payment providers, email services, customer service bots, etc., into their ecosystem.

You can either build your custom integrations or use ready-made APIs from popular service providers. Both these options vary in terms of development time and cost. So, take the final decision as per your estimated SaaS development costs and budget.

d.) Core features

There are a few must-have features you will need in any SaaS application. Let’s analyze them:

  • Payment system: Subscription-based revenue model is the base of any SaaS application. So, having a robust payment system is essential. There are two ways to build this feature – Using integrations or building custom solutions.
Using Integrations Building Custom Integrations
Use ready-made payment gateways. Specific requirements will require extensive research from the developer’s end.
Easier and faster to put in place. It requires a lot of development time and effort to get it right.
You need to include third-party services in your existing product. Need to have knowledge of developing a secure payment system and have to write code from scratch for perfect execution.
  • Secure database: Database being the most critical aspect of any SaaS mobile app, must be developed with stringent security standards. Most database providers use SSL and TLS encryption. However, you can be doubly sure by following compliances like HIPPA and GDPR for data protection right from the inception.
  • No downtime deployment: For any SaaS application, two things matter most – (i) high uptime and (ii) constant updates. Therefore, the development teams should plan app updates where the product remains available all the time.
  • Subscription lifecycle management: Subscription model usually involves subscribing, trailing, upgrading, canceling, and unsubscribing stages. There are two ways to manage these stages – using integrations or building custom solutions. Integrations are of course less expensive compared to custom solutions but have an annual fee for API maintenance. On other hand, custom solutions can serve specific needs and require a one-time investment.

e.) SaaS development team

There can’t be a fixed number of members in the SaaS development team. You can hire and employ as many people as you want according to your requirements and budget. However, there are a few positions or roles that you should focus on while building a product development team.

Here are some of the designations you would require in a SaaS development team:

  • Project manager: They manage the SaaS software development life cycle, assign tasks to team members, set up project timelines, and finally monitor the project’s progress.
  • UI/UX designer: They build the user experience and interface for the app by creating a design that’s aesthetically pleasing and aligns with your brand.
  • Business analyst: A person responsible for analyzing software’s role in the market, its present and future scope, the problem it aims to solve, and everything else related to it.
  • Back-end developer: A person who works on your application’s server-side and ensures it functions as per the plan created in the requirements.
  • Front-end developer: A person responsible for client-side development by tuning design into code through JavaScript and frameworks.
  • QA engineer: A person who tests your SaaS app to find any bugs, errors, defects, and issues before it gets launched in the market.

Furthermore, if your startup is following the modern philosophy of DevOps, you should hire dedicated DevOps engineers for optimization.

f.) SaaS development framework

With years of experience in helping SaaS startups, AWS has developed a SaaS journey framework consisting of four categories.

Stages-of-SaaS-Product-Journey
  • ToeDipper: A large and traditional company running on a legacy product whose growth is hindered due to aging technology but has a captive and lucrative market.
  • SurvivorTech: These companies have an existing product, but market share gets captured by the competitors that have used price, agility, cost, or efficiency as a weapon.
  • UnicornExpress: These companies are building a new product from scratch and setting out on the path of the SaaS growth model without worrying about legacy applications.
  • New Horizons: These companies have a SaaS product but are looking for a new audience or market segment to tap into the potential that their competitors have not tapped.

The figure below represents these four different SaaS company journeys in simplistic terms:

SaaS-Company-Journeys

2. Non-Technical considerations

a.) Market research

A clear understanding of the market will help you know if there’s a unique challenge that your targeted customers would like to be solved. Eventually, this may help you gain a competitive edge once you have sufficient knowledge about technologies and the latest trends in the market, which is highly essential.

b.) SaaS pricing models

The monetization model of any SaaS company becomes the base for their future earnings. So, choose a model that aligns with project timelines, budgets, and marketing expectations.

Here are some of the most popular SaaS pricing models:

Type of Models Pros Cons
Flat-Price
  • Easy to explain
  • Easy to sell
  • Can’t target every client
  • Limited up-selling opportunities
Usage-Based
  • Scaling of pricing with usage is an attractive
  • Fewer upfront cost
  • Difficult to predict revenue
  • Customers with high volatility may find this model difficult
Tiered-Pricing
  • Can attract various customer segments
  • Easy to up-sell
  • May not account for heavy users
  • Broad pool of customers
Per-User Pricing
  • Easy to use and understand
  • Revenue rises with adoption
  • Higher churn rate
  • Doesn’t work with all types of customers
Per Active User
  • Results in more users
  • No wastage of money
  • Not ideal for smaller businesses
  • No guarantee of usage
Per-Feature Pricing
  • Strong initiative for up-gradation
  • Heavy users will get accommodated
  • Some customers may not like this model
  • Difficult to set price for each feature
Freemium
  • Quicker adoption at an initial level
  • The product can become viral
  • Low conversations for premium subscriptions
  • Customers may view the product as low-valued

d.) SaaS pricing strategies

Do not get confused between pricing models and pricing strategies. While the pricing model defines the actual pricing for the SaaS model, pricing strategies define the approach you should use to describe the SaaS product. Here are popular SaaS pricing strategies:

Pricing Strategies Description
Penetration Pricing Reducing prices to attract a particular audience segment at the initial level and overcome barriers to entry into a new market.
Captive Pricing Offers the top product at a significantly lower price, while the related products that customers may buy are of higher prices.
Skimming Pricing Placing a higher price on a new product that eventually gets lower over time. Also known as promotional pricing or writing down the demand curve.
Prestige Pricing Maintaining a higher price on a particular product for an extended period gives it an aura of luxury or exclusivity.
Free-Trial Pricing Offering a free trial of your product for some days or months and then charging for it later on as you develop a solid customer base.

With both technical and non-technical prerequisites sorted, it’s time to move on to the execution phase and understand every step in a SaaS project or software development process. So, let’s analyze that in the next section.

How to develop SaaS solutions?

Step 1: Requirement analysis and planning

The first step for developing SaaS applications is to carry out requirement analysis. It involves conducting thorough research about the requirements of the company and product. Here, business analysts have an integral part to play as they can help you define your product’s present and future scope. Moreover, they can also help in competitor analysis, finding business opportunities, scaling strategies, etc.

Step 2: Designing

The next stage is to create a design that may consist of wireframes, user stories, mockups, accessibility design, user interaction design, functional prototypes, user experience design, etc.

Step 3: Development

This phase consists of solution architects and software developers working together. The solution architect team takes care of architecture and infrastructure level decisions while the dedicated development team writes source code for SaaS apps using the tech stack decided during the technical consideration phase. The information and data security team also have a role to play in this phase as it helps implement the SaaS development best practices related to security and governance.

Step 4: Deployment

This phase includes the DevOps engineer or the dedicated DevOps team working together on automating the workflows and creating CI/CD pipeline. Moreover, they also help you in cloud infrastructure management so that downtime is minimum and scaling is efficient.

Step 5: Testing and maintenance

SaaS software testing is about delivering a robust, secure, and reliable final product to the customer. It’s also about ensuring that the software meets the requirements and user expectations laid out in the initial phase. In today’s day and age, continuous testing through DevOps is the way forward, and most SaaS companies use this methodology. Lastly, the focus should be on both functional and non-functional testing to maximize performance, scalability, reliability, user acceptance, etc., matter a lot.

Step 6: Optimization

Developing the product is just the start of the SaaS application development game. At the end, it’s about increasing the business, where optimization comes into play. Meticulous optimization of resources can help you lower the production cost and maximize the profit for your business.

These are the essential steps that one should follow for developing world-class SaaS web applications. In the next section, we’ll answer the question of how much SaaS software development costs. Let us explore that in our next section.

Cost of SaaS app development

There can’t be a one-size-fits-all approach to estimating the average cost of SaaS application development. Instead, various factors make up the cost calculation, such as the size of the development team, type of hiring models, geographic location, features incorporated into the app, the complexity of the app, etc.

The average cost to build a SaaS MVP lies somewhere between $20,000 and $70,000. The full-fledged app development may cost you somewhere between $80,000-$200,000. Now, let’s break down the cost calculation according to various factors.

As per development phases:

Each stage requires a particular time, and there is a cost associated with it.

Development Phase Hours Required Average Cost
Validation and Planning 30-200 $20,000-$80,000 (MVP)
MVP Creation 250-300 $20,000-$80,000 (MVP)
UI/UX Design 100-220 $3000-$5500
Front-End 350-550 $6000-$20,000
Back-End 650-850 $15,000-$65,000

[Source]
The cost also varies depending on geographical region. For example, the SaaS development cost in North America is different from Asia and vastly different in Europe.

Geographical Region Hourly Rate of Developers
North America $50-$250
South America $15-$65
Eastern Europe $30-$80
Western Europe $40-$110
Southeast Asia $20-$50

[Source]

As per team type:

Another factor that can impact the development cost is the type of team. Whether you opt for an in-house team, local agency, freelancers, or outsourcing agency, the price varies accordingly.

Type of Team Average Cost
In-House $110,000
Local Agency $150,000
Freelancers $50,000
Outsourcing Agency $60,000

The detailed analysis of cost calculation will help you plan things better. However, knowing the steps, technical and non-technical aspects, and SaaS app development costs doesn’t make your world rosy. There are plenty of challenges that you need to deal with while developing your SaaS app. The following section will put a light on those in detail.

Challenges of SaaS software development

Challenges-of-SaaS-Software-Development
  • Scalability: The first challenge is whether the tech stack of your SaaS application is scalable or not. If it’s not, your SaaS business can’t grow. So, choose a tech stack that can quickly scale soon.
  • Security: Every business founder/co-founder should ensure that the products delivered to clients are secure. The personal information of customers should have a high level of encryption.
  • Reliability: Reliability comes with selecting trusted technologies for your SaaS app development. Choosing trustworthy partners for your servers, programming language, database, cloud infrastructure, etc., can lead to higher reliability.
  • Monetization: How to make money out of SaaS products is the biggest challenge faced by the founders. For that purpose, choosing suitable SaaS pricing models and strategies discussed above is essential. If you get that right, you are on the right track.

Want to build your own SaaS app?

Joel Gascoigne worked as a freelance web developer before launching a SaaS startup named Buffer in 2010, a platform that lets you schedule social media posts. Today, Buffer has over $16 million in annual revenue. Similarly, Bryan Helmig worked as a freelancer and did a lot of business in Columbia before he and his friend launched a SaaS startup named Zapier in 2011, a platform that enables easy data integration between 4000+ apps. Zapier’s annual revenue reached $140 million in March 2022, with 3 million subscribers.

The moral of the story is? Finding a reliable partner, adopting the right technology, and applying best practices are the foundation of a successful SaaS application development.

As one of the top-rated SaaS development companies, Simform has worked for various industry verticals such as banking and finance, real estate, media and entertainment, education, etc. So, get in touch with our proficient and skilled professionals for SaaS consulting and avail a standout solution.

Jignesh is Director of Sales at Simform leading through a consultative approach and aligning the right team for tech initiatives, and helping organizations achieve advanced digital engineering goals.

  1. Sunil Rawat

    Very nice blog, you have done here. So keep it up and help the visitors.

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