Software-as-a-service (SaaS) Development Costs: An Overview

An alternative business model for traditional software licensing is SaaS, or software as a service. With the SaaS approach, vendors don't sell their software with a lifetime license or wait until next year's release to release feature updates. Instead, companies sell their software as a service usually through a subscription model.

Software as a service has recently become the most popular business model for IT solutions across various industries. SaaS versions of various business applications, such as CRM, Marketing Automation, EMR (Electronic Medical Records) or EHR (Electronic Health Records) software, are becoming increasingly popular. No wonder companies are turning to SaaS product development.

Due to the pandemic, the demand for remote collaboration has increased significantly, and services offering the Saas development are also becoming popular as a result. Specifically, convenience and affordability have forced organizations to adopt SaaS solutions in this competitive market. Therefore, building a SaaS application is probably a good solution and a thriving business idea right now.

Let's dig deeper into what SaaS development entails and how much it costs!

Software-as-a-service Features

The main difference with SaaS as a business model is that the owner of the service takes full responsibility for updating, maintaining and managing it. To use the platform's features, users do not need to download, install or update any software. For business owners, the SaaS model has become a true salvation from the headaches associated with unlicensed software that customers face.

The operating principle of SaaS services can be compared to renting an apartment. The landlord provides furniture, white goods and all facilities, and the tenant pays for use. However, such a comparison is not correct, as it is quite superficial.

To better understand what distinguishes a SaaS service from others, let's look at the feature of its operation:

• Intended for remote use;
• Several people can use the service at the same time, which makes it possible to combine teamwork;
• The owner creates a usage fee based on the subscription fee for a specific period or selected features;
• The owner manages the modernization and maintenance of the service.

To demonstrate customers to the available features, SaaS platforms offer demo versions, free packages with limited functionality or time-limited full access to tools. Users can then "rent" the required services, which is much cheaper than buying licensed software. Due to relatively low cost and ease of use, the popularity of SaaS platforms is growing rapidly.

Advantages and Disadvantages of SaaS Platforms

For software developers, SaaS is the holy grail of a recurring revenue model and offers faster time to market than on-premise software. Like other cloud services, SaaS offers small businesses the opportunity to enter existing markets while benefiting from fair SaaS pricing models.

Other advantages include

• Accessibility: 24/7 access from any device via a web browser
• Operational Management: No installation, device updates or traditional license management
• Cost Effective: No upfront hardware fees and flexible payment methods like pay-as-you-go models
• Scalability: Easily adapt the solution to changing needs
• Data Storage: Data has regularly archived in the cloud
• Analytics: Access to data reporting and intelligence tools
• Increase Security: SaaS service providers invest heavily in information security technology and know-how

Despite the obvious advantages of SaaS platforms for owners and users, these services also have some problems. In the following, we will go into the most important ones in more detail.

Each user's earnings span over time. This is because the cost of acquiring a new customer often exceeds the revenue by the amount of their first purchase. Therefore, SaaS owners need to regularly work on user retention in order to generate profits. Maintaining competitiveness, business development and expansion play an important role here.

Continuous collaboration with developers. Renovate the service, its scale and its support. All of this costs money, and time and requires certain resources.

Another disadvantage that should not be neglected is the dependence on Internet speed. However, this challenge is decreasing day by day as the stability of the internet continues to increase.

In order to develop the high-quality product demanded by the market, the interests of the target group must be taken into account and a good development team must be found.

SaaS Product Development Process

Consider the main stages of building SaaS services. In general, the SaaS development process is similar to the development process for most software products.

Market Analysis: Validate your idea

The long-term success of your product depends on good market research that gives you an understanding of your competitors and the needs of your potential customers. This study will give you validation and help you not to repeat the mistakes of failure. You need to make sure your target customers are willing to pay for your product and that what you offer meets their needs. Make sure your business model offers clear, repeatable benefits and appeals to a wide audience.

Discuss SaaS product requirements

There are some similarities between SaaS solutions. Therefore, a clear plan for customisation, integration options and security is essential. In the SaaS model, it is of utmost importance to ensure maximum data security, as this is the basis of a good solution. Consumer demands are constantly changing, so you need to be able to adapt to them. Your software must also be designed to handle the growing number of users without slowing down.

Define MVP

A minimum viable product means the basic features that deliver value to your customers at the lowest cost. The MVP is what the first testers try and what will be in the final product.

A simple way to define a minimum viable product is by answering questions like your user personality, what actions users are taking to solve their problems, and what solutions you can offer.

There are different pricing models for SaaS solutions that can greatly affect the popularity of your product. The pricing strategy should be modified according to the needs of the target users.

Here you have to define how your software should be created. You should speak to professionals who can help you determine the programming language, tools, and platforms required to build your SaaS product. It's important to keep both the long-term product and the MVP in mind.

Now is the time to find or build a software development team. Here you can build your company team or outsource the development fully or partially. Outsourcing to a full-fledged team gives you many benefits and allows you to focus on business processes such as marketing.

After all the steps, you should now have an idea of how much SaaS application development will cost you. Think about how long it will take to create your product and how long it will take to start selling it. Plan your budget carefully, taking into account possible changes and delays. It's better to think the worst and be surprised than the other way around.

SaaS Product Development Cost

So how much does it cost to build a SaaS application? There is no one-size-fits-all answer to this question, as each project is unique, as is its cost. To understand how to calculate the cost of developing SaaS applications, we will discuss the important factors that affect it.

Scope of your SaaS project

First, decide what type of SaaS product you want to build. Want to build a SaaS platform or tool? The reality is that these types of software-as-a-service systems have a different scope. Therefore, the cost of building a SaaS application also varies.

Implemented functionality

The price of SaaS development depends on the complexity of your project. The more features your product has, the higher the price you will have to pay. Therefore, choose the features you need wisely as it affects the development cost of SaaS products.

Draw a clear line between required functionality and desirable but non-essential feature. This ensures that you don't overpay for unnecessary SaaS application development options.

Choose development team

If you don't have your own development team to hire the right experts for your SaaS product, you have two options. You can go with a freelance team or work with a SaaS application development company.

Each of these versions has peculiarities that can impact the cost of building a SaaS application. A brief overview of each option below will help you make the right choice.

Hiring freelancers will cost you less than working with software vendors. The price difference can be explained by the fact that freelancers usually charge lower prices. This could reduce SaaS software development costs.

Existing SaaS Solutions: Examples

Understanding what a SaaS model is and what SaaS solutions are is easier with specific examples:

• Services that provide a functional infrastructure for creating projects or developing projects: Canva, Figma, GitHub.
• Cloud data storage, for example, Onedrive, Dropbox or Google Drive, offer server space for a small monthly fee.
• Personnel management or customer support systems - such as Hubspot, Salesforce, Odoo, Pipedrive and many more.
• And finally, platforms for building B2C and B2B e-commerce applications and shopping platforms: WooCommerce, Bitrix, Shopify, OpenCart, Magento (at a very high price) and more.

All of these solutions offer customers the opportunity to implement their projects quickly, and complete service with their own development, implementation, integration, technical support, analysis and design teams, which saves customers a considerable amount of time and money. 

Wrap-up

The SaaS model is an opportunity for B2B companies to take full advantage of a ready-to-use solution, using the best practices of the e-commerce market and considering the features, expectations and preferences. More importantly, in the case of the SaaS model, this not only translates into rapid solution deployment, but also lower operational costs due to business process optimization, as well as speed, accuracy, and human resources efficiency. 

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