SaaS Application Development: A Guide for Startups

You've probably heard of the cloud revolution that's been upon us throughout the past couple of years. Software-as-a-service is in high demand, luring entrepreneurs with its scalability opportunities and the ability to cater to a wide range of industries and purposes. Versatility and high potential for growth are precisely why many opt for building a SaaS company.

Cloud storage solutions paved the way for a rapid leap in the SaaS development market, bringing a host of digital changes for businesses of all kind. It doesn't require installation, adjustments, or maintenance and has comparatively low starting costs (a point that's rather important for startups).

So, where do you begin if you aren't certain about how to build a SaaS app? Let's review all the details to consider when building a SaaS application and the peculiarities and vital aspects startup founders should keep in mind, like the implied costs and developer effort.

What Is SaaS?

SaaS, a.k.a. software-as-a-service, is a cloud-based model of delivering digital solutions to users for a monthly/yearly subscription fee. It is available via a browser and doesn't have to be installed and configured on a local device.

SaaS solutions are centrally hosted in the cloud storage on the vendor's servers and stored on the service provider's end, hence, they take proper care of its operations, security, and performance. Besides, the vendor is responsible for continuous service enhancement after the solution goes live.

How Popular Is SaaS?

There's been exponential growth in the SaaS market even before the pandemic. But the global outbreak has triggered interest from a wide variety of users and businesses alike. For instance, a recent market study suggests that the SaaS market is expected to climb to $908.21 billion by 2030 (from $273.55 billion in 2023).

As for the regional SaaS app insights, we can observe that the United States is the technology's major market. The country is home to circa 17,000 SaaS companies, which is substantially more than in any other survey participant on the list.

SaaS products are becoming increasingly prevalent in modern business, especially when it comes to organizing distributed working environments. And these findings are expected to encourage many business entrepreneurs and graduates with a software engineering degree to develop SaaS application solutions that will win over the hearts of target audiences.

What else makes creating a SaaS popular among startups? Interestingly, the percentage of venture capital investments in the category has been visibly growing in recent years. This means that it seems to be simpler for startup teams to pitch investors and secure funding if they have a quality SaaS product.

Types of SaaS Applications

A successful SaaS application can serve the needs of different business spheres and bring immense benefits to each of them. Web-based software powered by cloud technology can fall into a slew of categories.

There's a multitude of software-as-a-service tech that's already available and that you may consider building for your startup. Let's overview some tech business ideas in this sector, the most common SaaS application types, and several of the most inspiring examples of SaaS companies.

Vertical Solutions

A vertical SaaS solution is the type of software that caters to a specific niche or a defined line of business. Rather than embracing a broad range of user needs and demands, vertical solutions are designed to keep a specific request in mind. It is also sometimes referred to as micro-SaaS.

Each SaaS software developer and product creator in this category needs to rely on particular industry expertise to address target user pain points. As a reward, they typically enjoy less tight competition than in other segments and much lower marketing spend, explaining why building micro-SaaS attracts those starting a startup.

Some notable mentions of vertical SaaS products include:

• ‍Clearcare - a web-based platform for the home care industry;‍
• Madwire® - marketing services for SMBs and franchises;
• ‍HotSchedules - an employee scheduling app;
• Seller Snap - an Amazon repricing software.

CRM Solutions

CRM, or Customer relationship management software, is a cloud-based solution, which lets you manage customers, automate sales pipelines, and optimize internal processes. It brings the utmost visibility and transparency into sales, marketing, and customer service segments. 

Instead of downloading and installing a licensed software platform, a SaaS CRM solution gives instant access to all relevant information stored in the cloud. And there is no need to invest in its support and maintenance since it is a vendor's area of responsibility, thereby simplifying various business processes.

However, creating a SaaS like this may be a bit challenging for startups, keeping in mind the big players on the market. Some notable mentions of CRM SaaS software include:‍

• ‍Salesforce - a pioneering CRM platform known for its robust AI-driven capabilities. The company is currently worth $161.4 billion;
• ‍Microsoft Dynamics 365 - a comprehensive suite of web-based services for different domains;‍
• HubSpot - an end-to-end CRM platform with 135,000+ business customers.

E-commerce and Retail Solutions

With online sales peaking in popularity, the industry provided a timely response to buyers and sellers. SaaS e-commerce solutions enable businesses to set up their online stores, add payment gateways, and provide an easy checkout. They can even be of great help in marketplace development.

Such cloud-based solutions usually come with rich functionality in exchange for a subscription fee. The merchant can log into their account in any browser and start selling and promoting their products online. Besides, SaaS eCom solutions can support global expansion and deliver personalized promotions at scale.

In turn, startups continuously deliver innovative features to the retail market. As such, virtual try-on and advanced search are just the tip of the iceberg, enhancing the user experience.

Some notable mentions of eCom and Retail SaaS solutions include:

• Shopify - a platform that serves millions of small and Enterprise-level businesses in 175 countries;
• BigCommerce - a comprehensive drag-and-drop solution;
• Wix - an easy-to-use website builder.

Collaboration Software

The most must-have tools for geographically dispersed and hybrid teams are the ones that ensure seamless coordination and collaboration anytime, anywhere. They enable employees to remain productive and stay on the same page as the rest of the workforce.

Today's cloud-based technology has enabled companies to set up efficient workflows despite being apart with the help of SaaS collaboration platforms. They also serve to improve communication patterns, boost team cohesion, and promote the internal startup culture and company values.

This seemingly crowded market still has plenty of opportunities for startups. A great example of this is Onebar, a knowledge management platform that helps your team collect internal information and access it anywhere, which was created by Upsilon's team.

Some notable mentions of collaboration SaaS platforms include:

• ‍‍Trello - an interactive project management and collaboration tool;‍
• Slack - a cloud-based team collaboration platform that serves approximately 170.000 paying customers;
• Zoom - video conferencing service that is hosted in the cloud.

The above are just a few big names in the entire SaaS ecosystem of tools. Industry leaders surely disclosed the technology's potential in digitally transforming their business. With SaaS app development, it is possible to reap the advantages that would otherwise not be possible with other approaches. Let's explore them.

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Advantages of SaaS Application Development

What makes SaaS app development a beneficial move? And why should startup founders choose this path? Apart from the growing venture capital investment interest we've already mentioned above, here are several main points worth taking note of.

Cost Efficiency and Faster Time to Market

When you're developing SaaS applications, there is no need to face large upfront costs associated with traditional hardware and software development. There are plenty of MVP tools, platforms, and services that startup teams can leverage to build the first functioning versions of the SaaS rather quickly, speeding up deployment and time to market.

Moreover, you can offer flexible payment options including pay-as-you-go services for customers. Operating on a subscription-based model makes it possible for SaaS startups to adopt a recurring revenue model in the early stages of startup development, providing a continuous cash inflow (even if it's small at first).

Scalability and Accessibility

Did you know that 70% of CIOs opt for SaaS development because of its extensive scalability? SaaS applications can easily adjust to changing business needs and provide more storage space, users, and new software licenses. Such a low entry barrier for non-tech-savvy customers makes it extremely accessible, while user-friendliness and intuitive interfaces are what make people subscribe to the SaaS.

For startups and those creating such solutions, this means rapid growth and the opportunity to cater to the shifting needs of the market and customer base. If the traffic increases, there is quick growth, or the conditions change, teams can scale up their operations or make a business pivot. 

Security

SaaS vendors strive hard to remain on the same page with the latest security trends and innovations. They invest heavily in making their offerings highly protected against modern threats and malicious attacks. Proactive protection of cloud-based assets is one of the key calling cards of SaaS service providers. So, if a startup manages to nail the security side of the product, this can become an undeniable strength to win over clients and raise trust.

A Wide Range of Providers

The SaaS service market has become a crowded place in the last couple of years. Currently, diverse vendors offer different solutions at flexible price tiers. Clients can even switch between vendors when they aren't satisfied with their current service level.

Why is this good news for startups? There are lots of outdated legacy products or undercooked solutions that people are currently paying for but aren't too happy with. Creating a truly great product that delivers value can be your fast pass to get a big chunk of the pie.

High Compatibility

Working within a cloud delivery model, SaaS apps are highly compatible with all operating systems, including Linux and Windows as well as Android and iOS. As for third-party systems, each SaaS vendor has a pool of integration options with payment gateways, maps, CRMs, or EHR systems.

For startup teams, this implies even more opportunities and product use cases. You just need to discover the gaps that can be filled with a new SaaS solution.

No Hardware and Maintenance

There is no need to deal with heavyweight monolithic software, which is always thirsty for remedial and preventive maintenance efforts. On the other hand, SaaS eliminates the need to take proper care of hardware elements, cover errors, and pay for licenses. This is why both entrepreneurs and customers enjoy the cloud approach.

How to Build a SaaS Application

By now you should've figured out whether making SaaS software is the right path for your startup. However, the proper knowledge of how to build a SaaS product is equally important. As a custom software development company with immense expertise in cloud technologies, we follow established workflows and proven practices of delivering SaaS applications. Let's review the main 9 steps to building a SaaS product.

Step 1. Define Your Value

If you want your startup's offering to stand a chance, you have to build the SaaS product with end-user needs in mind. This means ensuring that it solves real-life problems, brings tangible value, and has straightforward features. Remember that there will be plenty of paying customers if the SaaS solution addresses their demands.

So, before you write even one line of code, ensure that there's a real need for what you're thinking about building. Study your potential buyers and which issues they face, segment the target audience, create user personas, and note what you can do to give them what they're craving. This will allow you to get one step closer to an effective proof of concept (POC).

Step 2. Conduct Market Research and Consider Your Competitors

Don't hurry with SaaS development just yet. To have a clear roadmap of future activities, you have to study the current market situation. This is what the project discovery phase is for.

Why not develop a better version of an existing SaaS solution and add unique features to it? As you conduct your market research, you will define the closest competitors and notice the good, the bad, and the ugly of their undertakings. For instance, if you manage to find the gaps in their service offering, just fill them in your upcoming project.

Step 3. Define the Primary Functionality

Identify the core features that will differentiate your SaaS product from other types of cloud-based services. A basic setup of features should also be contrasted to those of direct app competitors, especially if you're initiating an MVP development process first.

Hence, mind product feature prioritization, and here's what you should add to your SaaS application:

• functional features, which include the most essential elements of a SaaS app;
• analytical, which are capable of collecting and analyzing product performance metrics and vast amounts of data;
• management, which serve to define user types and add role-based access restrictions.

Step 4. Choose the Tech Stack

It's impossible to guide startups on how to create a SaaS application without mentioning the required tech stack to reach that milestone. This embraces the entire ecosystem of modern tools and technologies, chosen with project needs in mind. Here's what what the technology stack for a SaaS application may include.

1. Front-end tools. With them, it is possible to create client-facing interaction elements for a future solution. To create intuitive buttons, dropdown menus, or graphic elements, we use the following toolchains:

• HTML, CSS;
• JavaScript;
• Angular/React.js/Vue.js.

2. Back-end tools. SaaS platform development relies on modern server-side tools like Python or Node.js, or Ruby on Rails to ensure that all requests back and forth are handled in the right way. Another brick is a secure and efficient data storage that is responsible for storing critical back-end information (PostgreSQL, NoSQL, Redis, etc.).

3. Servers and cloud infrastructure. To make the shortlisted features work, it is necessary to deploy them in safe and transparent cloud-based environments. The options can stretch from Amazon Web Services (AWS) to Azure, and Google Cloud as well as private cloud storage solutions.

Step 5. Pay Attention to UI/UX Design

How do you create software that will make users stick to your brand? The answer partially lies in the ability to create attractive web pages with clear and consistent layouts. The MVP design step of the future SaaS application begins with translating the core requirements into wireframes and interactive prototypes that outline a connection between elements and user actions. Once approved, they will be converted into the initial UI design. 

The next step is to supplement the design elements with appropriate visual style and check their performance. Once you're through with these steps, the designs can be handed over to the software development team.

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Step 6. Choose the Most Suitable Pricing Strategy

The revenue model you opt for is one of the crucial things to consider when forming your SaaS sales strategy. After all, it affects the way others perceive your offering and make a final buying decision. Therefore, it is important to create service tiers based on the customers' needs and expectations.

Offering various pricing packages makes a developed SaaS solution more attractive to a larger pool of prospective end-users. Additionally, it is possible to provide some basic functionality for free and add tiered pricing for advanced features. This is considered a very effective strategy for startups aiming at achieving product-led growth. As such, using the freemium model has become one of the latest business trends for SaaS products.

Step 7. Find a Reliable SaaS Development Company

Getting a team of developers to build the SaaS application is a tough step. And what should you do if your startup doesn’t have its own developers yet?

Lack of technical expertise in your company is not a reason to give up on the idea of building a SaaS application. There are a couple of ways to acquire top engineering talent to develop the product for you. Here's a quick overview of the main options.

- Hire an in-house team‍

It is one of the best ways to ensure quality work with round-the-clock visibility into the project. On the flip side, if we compare in-house development vs outsourcing, the first approach may lead to substantial upfront expenses on sourcing, hiring, and managing the local workforce. This may lay a heavy burden on the company and negatively affect the project's timeframes, that's why not all startup founders are ready to take this hiring path.

Where do you find skilled professionals in your local area? If you do decide to hire developers for startups internally, you can begin by searching for developer profiles on LinkedIn or Indeed.com to shortlist the best candidates. 

- Hire freelancers‍

When you need specialized skills at a fraction of the cost, you may browse Upwork, Fiverr, or other popular freelance web developer sites. However, the risks of rework, unsatisfactory results, or lack of commitment should be on your radar all the time. This can be a temporary way out for startups, but can get chaotic at some point. Just compare hiring freelancers vs outsourcing.

- Hire an outsourced team‍

This option is the right fit when you need to access external expertise from trusted outsourcing destinations. There are numerous IT outsourcing models to select from, including hiring a dedicated team of developers.

Startup founders can basically lend assembled and well-versed teams with ample experience to create a great SaaS product. And you may benefit from the best quality-price ratio in situations where project requirements change (and with new products following the popular agile MVP approach that's usually the case). As a rule, experienced outsourcing companies like Upsilon follow the best practices of SaaS product development to ensure the developed application meets all tech and business requirements.

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Step 8. Build a SaaS App and Test It

And now it's time to put together the solution. The best way to understand how SaaS software development works is to envision it as a 5-step process: 

1. Planning. This step encourages every project stakeholder to negotiate short- and long-term objectives, log the requirements, create a timeline, plan the work ahead based on your priorities, and assign tasks. 
2. Development. Now it is time to set up the development environment, develop, and deploy features on production servers.
3. Documentation. It is a good idea to collect documentation, assess compliance and disaster recovery, and conduct other iterations related to your project's specifics. You can also create user manual and user guides for your end users.
4. Testing. With each iteration, new functionality, updates, and enhancements should undergo a careful QA testing process to be valuable for end-users.
5. Operations. After the system's deployment, it is necessary to monitor and fine-tune its performance, fix bugs, and manage compliance. The team collects the initial feedback during MVP validation as well to plan for future improvements and adjustments. 

Step 9. Take Care of the After-launch Maintenance and Support

The lifecycle of SaaS application development proceeds to equally important matters after MVP launch. The development team needs to provide ongoing updates and security patches to improve UX and meet changing security and compliance requirements in the post MVP stage.

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Tech Difficulties When Developing SaaS Applications

As you see, there's a lot to handle if you're thinking about how to build a SaaS company that'll deliver a worthwhile product. It is hard to deny that a startup can stumble upon a host of challenges during the SaaS development lifecycle.

Such projects are usually tailor-made, which means they need to rely on unique architectures and respond to particular requirements. On the other hand, SaaS products should also correspond to certain tech standards. What are the core difficulties? And which roadblocks can startup teams face when building SaaS applications?

Selecting the Wrong Tech Stack

Many teams make the mistake of choosing an inefficient startup tech stack, which makes things go cross with the SaaS application early on. It is necessary to assemble the right toolchains for each specific case, so copying off someone else's set won't get you far.

What if the startup team doesn't have a tech co-founder or someone with enough expertise to make technology-related calls for the project? In this event, it makes sense to resort to a tech consultancy or use CTO advisory services to set things straight. An external expert or Chief Technology Officer will help identify the core technologies for the project and lay the right foundation so the solution can scale, integrate seamlessly, and have high performance.

Integration Issues

On a similar note, applying APIs for integration with third-party software and web portals is a complex undertaking for a newly built solution. It is best to create a product structure that will match seamlessly with external services from the very beginning. Therefore, startups have to think through the required integrations and scalability flexibility so as to not end up with dead ends.

Neglecting Security and Confidentiality

As most SaaS apps contain tons of sensitive information, proper measures need to be taken to ensure its protection. Data encryption, two-factor authentication, and other techniques need to be implemented in your SaaS product by default.

It may be challenging for startups to handle the cybersecurity side of the product due to the lack of resources or expertise. Yet it is integral not to neglect compliance with regulations, as data breaches can harm the brand, lead to lost trust, and even more drastic legal consequences.

Mismatches in Privacy

Likewise, the legal side of your SaaS offering can't be overlooked as well. Make sure you include clear and straightforward guidelines and a personalized privacy policy. For example, if you plan to serve European clients, full compliance with GDPR should be guaranteed by default.

Lack of Credibility

Businesses need to give users a lot of signs that their SaaS app is trustworthy and credible. Gaining users' trust and dealing with reputational risks are equally crucial things to consider for industry newcomers.

Not Enough Robustness

No one likes to deal with poor performance and downtime even for a good reason. The SaaS app should be always capable of avoiding failures, so startup teams must take care of backups and implement zero downtime deployment practices. Hence, as you're building a SaaS application, you have to make solution robustness one of your priorities, even if the startup's resources are limited.

Irrational Subscription Plans

An improper monetization strategy may become a source of struggle for entrepreneurs. To succeed with payment options, you need to explore the financial capabilities of end-users and offer the most optimal pricing policy. Startups should study the offerings of existing competitors and not be afraid to change things around in the subscription plans to find a suitable median.

How Do You Calculate SaaS Cost?

Now that you are aware of the major difficulties to consider when building a SaaS product, it is time to turn to another crucial aspect. You can't have a full picture of the future development process without a solid knowledge of its costs, which is especially relevant for those on a tight startup budget. Let's answer the question: how much does it cost to build a SaaS platform?

For project estimation, we use the PERT (Program Evaluation and Review Technique) method. It includes three points of estimate: Pessimistic, Realistic (it can be also called the most likely case estimate), Optimistic. An average expected estimate is calculated by taking a weighted average of these three points of estimates using the formula:

(optimistic + pessimistic + (4 x realistic))/6 = expected estimate 

For our SaaS product estimations, we defined the essential subscription functionality to create a SaaS application, the standard team structure, and calculated the development time based on the PERT method. You can see the result below: 

The approximate duration is 7.5 months for the development till release, considering one full-stack developer. And approximately 2 months for the development till release, considering four full-stack developers. You can also see a QA engineer and project manager in our estimation. We recommend forming the web development team taking into account these specialists. 

A QA engineer guarantees product quality during the whole product development life cycle. A project manager provides the day-to-day management of the project, ensuring that communication between the client and the team is going smoothly. A well-formed team will make the SaaS application development more manageable and effective. 

Based on the estimate and our experience in SaaS development, we can say that the price of a SaaS application will start at $50,000. Here we talk about the subscription functionality, which is the core of the SaaS product. The cost of a complete, fully-featured SaaS will be around $150,000-200,000 and more. 

Keep in mind that all estimations provided here are rough. The final SaaS cost and project timing may vary, depending on the following factors: 

• The complexity of features. The more complicated the feature is, the more time the development team needs to implement it. 
• Hiring option. You can choose from outsourcing companies, freelancers, and in-house teams. 
• Number of specialists and their hourly rates. The hourly rate depends on the hiring option, location, and qualification of the specialist. Developers from the USA will have higher rates than the same developers from Eastern or Central Europe. 

If you want to get an accurate estimation of your future project, contact us, and our business development specialists will gladly provide a consultation.

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Final Thoughts on How to Develop a SaaS Product

With more SaaS companies entering the game, it is getting harder to navigate the options available to implement your idea. Hopefully, our guide helps you streamline the decision-making process and get started with the project faster. Furthermore, don't hesitate to reach out for more insights into SaaS development. We can help you develop a SaaS application at an early-stage of your startup and scale it while you're growing your business.

FAQ

1. What is SaaS?

SaaS, also known as software-as-a-service, is a cloud-based model of delivering digital solutions to users for a monthly/yearly subscription fee. It is available via a browser and doesn’t have to be installed and configured on a local device.

2. What are the main areas SaaS solutions are used in?

SaaS software can be suitable for almost any sphere of business. These apps can be used in e-commerce, digital marketing, CRMs, workflow automation, project management, business intelligence, etc.

3. What are the main steps to develop a SaaS application?

SaaS application development usually consists of the following steps:

1. Defining the value
2. Market research
3. Identifying the primary functionality
4. Choosing the tech stack
5. UI/UX design
6. Choosing the pricing strategy
7. Finding a SaaS development company
8. Building the app and testing it
9. Post-launch maintenance and support

4. What are the most reliable ways to hire a SaaS application development team?

There are three main ways to hire SaaS developers. There is an option to hire freelancers, which is a good option if you need people with specific competence at a lower cost. Also it is possible to hire an in-house team, which can help you ensure high quality, though it can sometimes lead to substantial upfront expenses. And there is another option – to hire an outsourced development team, which can offer a better quality-price ratio.