SaaS Application Development: How to Start a SaaS Business

WIX, Slack, MailChimp, Zoom, and Dropbox. The Software-as-a-Service (SaaS) business is an approach to digital development that is gaining momentum these days. It is forecast to be used by over 80% of mobile startups by the end of 2022.

According to the concept, one can build SaaS-based applications with a small budget using cloud-based storage and technologies.

As SaaS is an extremely profitable business area in 2020, the question of how to create a software as a service that could overcome the competitive challenge and stay reliable is rising up the agenda. 

Our article will help you to understand why SaaS is believed to be cost-effective, agile, and highly accessible for many. The advantages of a ready-to-use system such as SaaS will become clear for programmers and startups too.

Checklist: Before Building a SaaS Application

The idea behind a SaaS-based business is to optimize the resources of their customers. The approach helps startups and corporations to stay cost-effective investing zero capital into custom tech solution development. 

How to start a SaaS business? Like any other startup, you should clarify the pillar points considering your future product and enterprise. Target audience needs, monetization model, promotional mechanisms, budget, and technology — are believed to be the most critical issues that will increase or decrease your chances of success. To learn more, read our blog article How to Start a Startup. 

Second, Saas application development has its technical specifics, which fill influence your budget and team requirement greatly:

• Single- or multi-tenancy architecture (the second one is cheaper, while the first is more secure)
• Guarantees of data of security (higher security level is more expensive and might limit a partners’ scalability options)
• The number of features 
• Service upgrade frequency
• Integration with other services using API (up to 90% of SaaS solutions are integrational)
• Monetization concept (subscription, one-off payment, custom packages)

Best practices concerning SaaS technologies, (take Google tools, Adobe, Shopify, or Microsoft as examples), show that the proven way to become in-demand and profitable in the SaaS business is to invest time and energy in learning the target audience needs, together with developing and testing brand new technologies. At the same time, there is a tendency to build niche SaaS products on the market. 

We advise you to take at least three steps to cover your Discovery project stage issues. If you’d like to know more — go to the ‘What is a Mobile App Development Lifecycle’ article. 

Step 1. Research the market

Artificial intelligence (AI), niche-oriented strategy, increasing the profits of mobile apps are just some of the points you will need to learn more about. It is also possible, that in 2020, we’ll see the rise of a completely new technology connected with machine learning, AR, and VR. 

Tech trends and niche innovations are things SaaS depends on as it serves businesses. We recommend you to take an in-depth look into what’s going on in the tech world or, perhaps, hire a niche specialist.  

Step 2. Know your target customer

You can’t sell anything to a person you know nothing about, especially when talking about  a highly competitive field such as SaaS. 

The issue requires a separate discussion, however, we advise that you develop a portrait of the target audience, list their needs and fears, define your product from the Job-to-Be-Done point of view, and, finally, find out what monetization approach will work for you. More on this topic — I Have an App Idea Now What.

Step 3. How customers can use your SaaS product 

Continue your market and target audience research and define what competitive advantages you have, compared with similar SaaS providers. Then, try to define in what circumstances your product could be conveniently used by your potential customers. 

Think of projected user journeys as well as situations when something will get in the way of them. Share issues with your developers, UX and UI designers in the future.   

Technology and SaaS Architecture

The SaaS approach is based on innovative technologies. To a greater or lesser degree, companies and private parties outsource their tech tasks using cloud-based services. 

There are several key features of SaaS products. These will depend on your product type, market research, or even the development budget you have available. LANARS also builds SaaS for its clients. Find our suggestions above:    

• Programming language (Python)
  Obviously, cloud SaaS needs a powerful yet simple programming language that will cover today’s development requirements. Sometimes, companies opt for what programming language their in-house developers are most familiar with. It is also true that it may be hard to choose between the various language options. 
  
  While JavaScript and SQL are the most popular for general purposes, Python is a good choice for SaaS, as it is readable and flexible. 
  
  
• Database (MongoDB)
  A secure document-oriented database is a must for SaaS products. The difference between this type of database and a relational one is its small size and the ability to keep data separate and use it in a flexible way. You can empower the database with a modern programming language, such as Python. 
  
  MongoDB, with its automatic sharding feature, can become your major database as it is scalable and displays good performance (speed) within different tasks. That means that you will not lose your technical potential scaling your business.   
  
  
• Queuing system (RabbitMQ)
  The Communication protocol, also is known as a queuing system or message queuing (MSMQ) technology, helps apps to receive and send messages cooperating with third parties, including APIs and servers. It is the backbone of the product infrastructure. A message queuing system stores system messages and transmits them when it is possible. 
  
  The major advantage of RabbitMQ, which we recommend you to use for your SaaS purposes, is its scalability and robustness. The system is open-source, free to install, and can be run interacting with various operating systems and programming languages. 
  
  
• Cloud Computing Services and CDN (AWS)
  The SaaS development platform core element is a cloud computing service whose task is to enable all the features you build. Depending on which service you choose, your ability to scale, upgrade vector, and the niche you work in, will differ. In 2020, a good option is to try AWS (Amazon Web Services) — the most flexible and complete platform to date. With its help, you can host and run your product, test it, and develop. 
  
  AWS has a high-performance rate and integrates with Elastic Compute Cloud (EC2) as its native element. The AWS EC2 architecture helps you to reach resizable computing capacity and can scale your tech resources. You can also choose the location of your EC2 servers. A content delivery network (CDN) is one more element you have to choose before getting the development job done. CDN is a tool to serve the content of your product.    

Check another article in our blog to become familiar with other tech issues — Choosing a Tech Stack for Full-Cycle Web Application Development. 

 

Challenges of SaaS Development

The SaaS business concept is to sell digital services instead of products. It sounds like nonsense for today’s user to buy a program on a physical media without the ability to constantly update the product software. The SaaS approach is a good alternative for both developers and users. 

One common commercial model is subscription. Users purchase access to the cloud service on the Internet and use it online (mostly) and offline without having to purchase additional hardware resources. That’s why a SaaS developer is expected to find the solution of how to keep the service sustainable and performing competitively, store data securely and reduce the risk of system failures that could lead to client data corruption.

There are 4 challenges of SaaS software development you should consider at a very early stage: 

Challenge #1. Scalability

If your tech stack is not scalable, your business is not able to grow. That works both in terms of SaaS startups (which could display slower performance as the number of clients grows bigger) and SaaS clients (whose business will no longer be able to operate if the cloud service shuts down due to overload). 

Although vertical development is a trend among modern digital businesses, there is still an issue connected to the target audience size. If your SaaS product is a niche one, you might not have enough customers to cover your business maintenance bills.   

Challenge #2. Security

As a vendor, you must guarantee data privacy to your customers. Bank information, personal data, commercial secrets, and much more may leak because of poor cloud service security. In these cases, you’ll not just lose your business, but will also be subjected to an enormous fine.  

Challenge #3. Reliability

The AWS SaaS architecture is considered to be the most reliable platform for cloud software maintenance. However, the system operates with physical servers that have a certain geographical location that could be damaged, (servers can catch fire, get wet, be blown up or simply suffer due to human factors). 

AWS also prevents your web sites and products from being shut down due to overloading. The service provider gives you a resource deposit (surge protection) and allows you to scale server potential easily, by switching from one plan to another.  

Another issue is trust. SaaS tools reduce the sense of security, as clients need to store their valuable data elsewhere (not on their own hard drive). By establishing a brand and working on a positive reputation, you may gain a lot of customers. 

Logo, UI, corporate colors, and early crowd marketing promotion campaigns will be helpful. However, that is always difficult to make people trust you being a young startup.  

Challenge #4. Monetization concerns (too expensive or too cheap?) 

The reason why people use SaaS products is for their cost-effectiveness. Businesses as well as private users don’t always have (or are willing to spend) the resources to establish custom digital services from scratch. The SaaS approach helps users to share the tech development costs in areas where typical solutions are applicable. 

At the same time, the provider’s service musn’t be too expensive, as no one would be able to afford it. You should study your target audience carefully to learn how much money they are ready to spend on your product. Second, you need to develop a sustainable monetization model where product upgrades and maintenance are periodically included in users’ bills. Think about pricing in advance. 

How to Build a SaaS Business? Monetization Models  

The SaaS architecture might seem clear when comparing monetization concepts applicable in that business area. Analyzing cloud services like MailChimp, Salesforce, Twilio, or SurveyMonkey you may notice that there are a number of approaches to stabilize the SaaS business. 

Choose your model considering project timelines, budgets, and marketing expectations. Here, we provide you with the most common monetization concepts.  Keep in mind, that many successful businesses try to mix them to avoid huge financial risks. 

• Free service, ads included 
  
  Your app will reach lots of users as it is free. There is a good way to test your marketing hypotheses and to conduct a real-time marketing survey. 
  
  At the same time, in-app advertising is the easiest way to monetize your product (in-app service vendors also work according to the SaaS concept). Another advantage — you’ll get your revenue immediately. However, in-app ads could make the UX look poorer.  
  
  
• Freemium model 
  
  How to build a saas business that will provide a revenue stream? Provide users with the basic functionality for free and then offer them access to premium features for an additional fee. 
  

  Most apps on the market are Freemium and their full or expanded functionality can be purchased according to subscription plans.

  Freemium apps attract users due to their accessibility for many, however, it can be difficult to decide whether a feature should be paid for or free.   
  
  
• Subscription plans 
  
  How to start a SaaS business if you are aiming to satisfy premium users’ needs? Establish a service subscription system and provide customers with access to your services that are limited by time, not by function.  
  
  
• One-off purchase 
  
  The one-off payment approach is not that popular considering that your Saas environment should be automatically upgraded frequently. To make paid for applications sustainable, you need to constantly increase the number of your customers, as well as setting really high prices for your product.
  
  There is also one more vulnerability of that model — not everyone is ready to buy a product they can’t test first. Work on your corporate image to reduce those objections. Free trial periods may also be an option for you.  

More monetization tips find here — How to Monetize Your App blog article. 

How Much Does It Cost to Create a SaaS Application?

The development costs depend on lots of factors. The number of features and integrations, design and architecture complexity, target market, and project timelines are the most critical issues. There are also such factors as the country of development (the difference between app development costs in the US compared to Ukraine is over $100 per hour). 

In general, the SaaS application development budget has several parts: business analysis,  design, programming, servers, software monitoring and maintenance, client support, and promotion. Task outsourcing is a popular way to reduce costs if you have a limited budget. Learn how to do it from our blog article — How to Hire a Dedicated Development team.   

UX and UI design (based on marketing research) 
up to $15,000 — main screens, additional screens, interactions, profile

Even SaaS businesses need to have clear and attractive interfaces. To come up with one that fits your needs, designers have to conduct research or get it from the marketing research team. Use guidelines created during the Discovery project stage: target audience description (requirements and tastes), a list of features, monetization strategy. 

Define the primary goal of design and use best practices to enrich your project. Don’t forget that your service should be scalable, so it is a good idea to create a design code and define the visual tone or voice of your business. 

Servers
from $30 to $8,000 — depends on the number of users

Usually, a SaaS development company spends most of its funds on hosting (servers). As the number of customers increases, you should increase your server potential too. 

Monitoring software and tech maintenance 
from $3,000 — depending on the number of users

To increase the reliability of your product you need to track how it works constantly. Incorporate powerful monitoring software that will let you know if something goes wrong. The more users there are the more resources it will take to monitor the system. 

Another question is tech maintenance. When an alert appears, there should be a programmer available to resolve the issue. That service can also be outsourced. Details — IT Outsourcing Advantages and Disadvantages.    

Development and tests 
from $20,000 — depends on features

Here, we are talking mainly about how to build SaaS applications and start gaining your first customers. Prototype building, MVP development, QA, deployment, and upgrading the product according to user feedback are hard to calculate without knowing the SaaS specific and your product features. The expected size of your audience also matters (more people means more resources). More about development team roles find here — App development Process. 

Also, leave around 10% of the development budget for marketing. Branding, content marketing campaign, feedback study strategy and others should be carefully planned and started long before the actual development takes place.  

Conclusion

SaaS development platforms is a business field to think about in 2020. This year, the size of the SaaS market is forecast to reach $157 billion and become an essential part of almost half of all digital businesses in the world (41%). Although the SaaS market niche is highly competitive, it is likely to be changeable too.

Those who’d like to outsource SaaS development need to be aware of certain tech issues considering the final product: programming language, database, queuing system, and server specifics. You’ll find it difficult to source a digital engineer with pure SaaS experience, that’s why you’ll need at least some tech stack experience in order to choose the right specialist within the global talent pole. 

FAQ

What is a SaaS application?

A SaaS application is software licensed using the Software as a Service business model. Software as a service (SaaS) is a software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet.

How do I create a SaaS application?

The SaaS approach is based on innovative technologies. To a greater or lesser degree, companies and private parties outsource their tech tasks using cloud-based services. Check how to hire developers in our article.

What is SaaS architecture?

SaaS applications are single-instance, multi-tenant architecture that provides a feature-rich experience competitive with on-premise applications.

What are the costs of SaaS app development?

Of course, the costs of developing a SaaS app vary depending on the complexity of the product, its features, integrations with other services, etc. You also have to carefully choose the country where your development team is based. This will define the price and quality of your product.

What are some examples of SaaS?

Examples of SaaS: BigCommerce, Google Apps, Salesforce, Dropbox, MailChimp, ZenDesk, DocuSign, Slack, Hubspot.

In 2020, start a SaaS business with LANARS tech support
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