The Ultimate Guide to Understanding SaaS Development

Gone are the days when businesses had no other option than to use bulky software systems and pay hefty upfront costs. The emergence of Software-as-a-Service (SaaS) has been a game-changer for such organizations. They are increasingly ditching traditional software models for a more agile and affordable alternative. The prevalence of SaaS development can be gauged by the fact that 99% of organizations use at least one SaaS application. 

But what exactly is SaaS, and why is it getting this much attention? The question might be lingering in your mind, especially if you’re just starting out in the tech world. 

With revenue predicted to reach approximately $439.82 billion in 2030 at a CAGR of 7.8%, SaaS has become a go-to choice for businesses, irrespective of their sizes. Compared to their cloud counterparts – Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS), SaaS products promise a much higher ROI and efficiency. 

However, developing a SaaS application isn’t everyone’s cup of tea; only a professional SaaS development company can deliver the expected result. The development demands experience, expertise, industry knowledge, and attention to detail that cannot be overlooked.    

Although your SaaS app development partner takes responsibility for delivering the end product, it is equally essential for you to understand the process. This will help you monitor the progress, guide the development team, integrate your suggestions, and enhance your decision-making abilities. So, to help you out, here’s a detailed guide to get started!

Market Statistics on SaaS Development: Facts & Figures

• The global SaaS industry is valued at around $237 billion in 2024 and is expected to reach $401.22 billion in 2030 at a CAGR of 7.8%. (Fortune Business Insights)
• 85% of business apps are expected to be SaaS-based by the end of 2025. (BetterCloud)
• The public cloud spending will surpass over 45% of the entire enterprise IT spending by 2026. (Gartner)
• The SaaS industries in India, China, and Brazil are likely to grow by 2 times between 2020 and 2025. (Reply)
• The AI in the SaaS market is expected to reach $1.5 trillion by 20230 from $73.8 billion in 2020. (Verified Market Research)
• 38% of SaaS-based organizations have integrated GenAI features into their services. (Panintelligence)

What is Software-as-a-Service (SaaS)?

Software-as-a-Service, better known as SaaS in the tech industry, refers to a software distribution model where a client pays an annual contract value or a monthly subscription to get the software and customer support. 

A provider usually hosts SaaS applications that are available to the client over the Internet, whether through the web, mobile app, or both. Although SaaS apps are quite popular, they are comparatively more generic than custom apps. 

As the provider takes care of the hosting and maintenance, you can minimize your reliance on the It resources, freeing up both capital and the human team to work on core business activities. 

The SaaS software solutions are typically available on subscription-based pricing, which allows clients to pay for what they use and budget the cost accordingly. 

Understanding the Different Types of SaaS Applications

Before we move on to understanding the SaaS development process, it is important to be aware of its type so you get a better idea of what specific software solution you need for your business. 

Here are different types of SaaS software based on usability:

• Productivity and Collaboration Tools: These SaaS solutions are cloud-based tools that help businesses enhance their collaboration and productivity through Word processors, spreadsheets, presentation software, simple project management software, project management tools, and messaging platforms. Popular examples include Google Workspace, Slack, Dropbox, and Trello.
• Customer Relationship Management (CRM) Software: The CRM solutions help businesses manage customer data, sales pipelines, and cloud interactions. These SaaS software are highly customized according to the business’s specific needs. Popular examples include HubSpot, Salesforce, and Zoho CRM.     
• Enterprise Resource Planning (ERP) Systems: SaaS-based ERP software solutions are a boon for organizations, helping them integrate their core business processes like human resources, accounting, and inventory management. Popular examples include NetSuite, Workday, and SAP S/4HANA Cloud.
• Content Management Systems (CMS): These cloud-based platforms help businesses create, publish, and manage digital content without much technical know-how. Popular examples include Shopify, Wix, Squarespace, and WordPress.
• Human Resources Management (HRM): These tools are extensively helpful for the HR team in managing employee onboarding, administration, payroll, and performance tracking. Popular examples include Gusto, Zenefits, and BambooHR.
• Business Intelligence and Analytics: These software systems are power-packed with advanced analytics capabilities, including data visualization and reporting. Popular examples include Power BI, Tableau, and Qlik Sense.
• Billing and Invoicing Tools: These Cloud-based applications help businesses with their billing and invoicing needs by automating recurring billing, managing payments, and creating professional invoices. Popular examples include Klarna, Stripe, and Recurly.
• Industry-specific Applications: Apart from the above SaaS-based apps, there are plenty of software solutions for different industries and sectors, including e-commerce, healthcare, real estate, and education. Popular examples include Yardi for property management, Veeva for life sciences, and Shopify for online marketplaces.

Why You Should Go for SaaS Development?

The benefits of SaaS software solutions are aplenty for businesses, as evidenced by its growing popularity. If you still have doubts about whether SaaS development is worth it for your business, you need to check out its compelling advantages below: 

Recurring Revenue

The notable benefit of SaaS applications for businesses is that they never miss a payment. These software solutions automatically manage subscription billing to ensure steady, predictable monthly or annual payments from clients. They offer a more reliable cash flow than traditional software. 

These software systems can predict the stream of subscription billing and customer growth through a deep understanding of the industry’s seasonality patterns and market dynamics. 

Scalability 

As SaaS software are known for their cloud-native architecture, their integration with a wide range of third-party solutions is comparatively easier than traditional software. SaaS software providers use well-documented existing APIs to integrate additional functionalities into the system.     

This helps businesses leverage the best of the industry with no need to invest in development from scratch, which leads to cost-saving for them.  

Ease of Deployment

The ease of deployment SaaS applications offer is probably one of the compelling reasons to ditch traditional software. It reduces both the cost and time required to deliver the solution in the market. 

The software’s ability to fix, update, and deploy in the cloud could potentially save software maintenance costs. This helps businesses provide value-added services, such as online training, user manuals, and cloud analytics. 

How to Build a SaaS Application from Scratch?

So, here comes the most interesting part— the development process itself. Although SaaS apps are generally over-the-shelf solutions, you can also develop custom solutions based on your business-specific needs. 

Step 1. Validate Your Software Idea

Validating an idea for a cloud-based product is very important. It helps ensure that you create something people need and that has a market. This step saves you from wasting time and money on a product no one wants. 

The first step in validation is to research the market. You need to get an overview of the industry to understand the demand for similar products and to identify your competitors. Analyzing your findings helps you discover the latest trends in Software as a Service (SaaS) and find any gaps your product can fill.

Next, you need to identify your target audience. Determine exactly who will use your product and understand their pain points, needs, and preferences. Conducting interviews and surveys can help you find out if the problem you want to solve is something people actually struggle with. Knowing your audience well ensures that you create a product that meets their needs.

Evaluating the existing products in the market is another crucial step. Assessing their strengths and weaknesses helps you define your unique value proposition (UVP). Your UVP is what makes your product different and better than others. 

After these steps, you can start shaping your product concept. It will be a blueprint for development, marketing, and execution. It should include a problem statement, which is a brief description of the problem your product addresses and how it solves it. It should also have a value proposition outlining your product's unique benefits and value. Lastly, describe your target market in detail, including demographics, job titles, industries, and any other relevant information.

Step 2. Select Features of Your App 

To succeed in the SaaS business, it’s important to offer features that make your product stand out from others. Before starting SaaS application development, it’s a good idea to do a competitive analysis. This helps you understand what features customers want and increases your chances of becoming a leader in the industry.

Here's how to identify and prioritize features for your SaaS product:

First, identify your business goals. Knowing what you want to achieve helps guide your decisions. Next, understand the needs of your users. Find out what problems they face and what they need from your product. Then, write opportunity statements. These statements highlight the areas where your product can make a difference. After that, brainstorm feature ideas. Think about all the possible features that could benefit your users. Finally, prioritize these features.

To prioritize features effectively, think about what your customers need, how each feature impacts your core value proposition, and whether it is feasible to implement. It helps to list all the features you want to include in your product. You can use different models like MoSCoW, RICE, or Kano to identify critical, performance, and delighter features. Focus on delivering the most valuable features early in the development process.

The Kano model is one way to prioritize features. It helps you understand which features are essential and which can delight users. However, the necessary features depend on the type of SaaS app you are developing. Common must-have features include user authentication, data security (such as a password policy, data masking, and access controls), an intuitive user interface (with quick actions and mobile gestures), and customer support (like a knowledge base, chatbot and in-app messaging).

When starting, focus on delivering the core functionality to create version 1.0 of your product. This lets you test your business idea’s feasibility and determine the best way to build a SaaS application efficiently and cost-effectively. You can develop a successful SaaS product by prioritizing the right features and ensuring they meet user needs.

Step 3. Choose a Monetization Model

When building a SaaS product, finding the right balance between giving value to your customers and getting fair payment for your work is important. You also want to stay competitive. 

Here are some popular pricing models to consider:

• Per-user pricing: This model is common for team-based products like Customer Relationship Management (CRM) tools and project management software. It involves charging customers based on the number of users or employees who use the product.
• Tiered pricing: If your cloud solution can be used in different ways, you can offer multiple packages with various features at different prices. This helps you grow your revenue by reaching different types of customers. It also allows customers to choose the package that best fits their needs.
• Per storage pricing: This model is straightforward. Customers pay based on the amount of storage they need. You can offer a certain amount of storage for free and then charge for additional storage once they exceed that limit.
• Feature-based pricing: In this model, the price is determined by the features available to the customer. This approach gives customers a clear reason to upgrade their package to access more features.
• Pay as you go: With this model, the price varies depending on how often the product is used. The more SaaS products are used, the higher the revenue will be.
• Subscription: This is a very transparent model. You offer one product with specific features at a set price. Customers pay a regular fee to continue using the product.
• Freemium: This model allows customers to use basic features for free. More advanced features are available in paid packages. This encourages customers to try the product and then upgrade to access more functionality.
• Ad-supported pricing: Similar to the freemium model, you get revenue from advertisements instead of earning money from paid features. Customers can use the product for free, but they see ads.

Step 4. Choose the Right Technology Stack

Choosing the right technologies is crucial when creating a SaaS product that can grow and handle many users at the same time. At Mtoag Technologies, we focus on the project discovery process. This means we carefully select the technologies that help our development team build a reliable, scalable, and secure solution quickly.

We use several web development technologies for SaaS product development. These technologies ensure that the product can handle increasing numbers of users smoothly. 

Here are some common technologies used in SaaS development:

Step 5. Create a Product Roadmap

Now that you have a clear vision for your product and have identified and prioritized its features, the next step is to estimate the project scope and build a roadmap. This roadmap will guide you on how to build your SaaS product, ensuring it aligns with your vision and meets user needs.

First, set milestones for the development of your SaaS application. These milestones should include the release date for the Minimum Viable Product (MVP) and subsequent releases. Start by clarifying your overall goals for the SaaS application.

Identify the key phases of development. These usually include ideation, MVP development, beta testing, feature enhancements, scalability improvements, and ongoing maintenance.

Next, determine the timeframes for each milestone. Consider factors such as the complexity of the tasks, availability of resources, and dependencies between milestones.

To visualize the roadmap, create a template that outlines the timeline and key milestones. You can use tools like Gantt charts, spreadsheets, or specialized roadmap software to do this.

​​Step 6. Develop a Business Plan

Creating a well-structured business plan is crucial for making smart business decisions, securing funding, and sharing your vision with stakeholders. 

Here are the important points your plan should include:

• Executive Summary: This section gives an overview of your SaaS business. It should include details about your product, target market, value proposition, and financial goals.
• Company Description: Describe your company, including its mission, vision, and core values. Explain why your company is in a good position to succeed in the SaaS market.
• Market Research: Include insights into industry trends, an analysis of your competitors, and information about your target audience's needs and preferences. This helps show that there is a demand for your product.
• Product Description: Explain your product’s unique features and how it addresses specific pain points for users. Show how your product provides value to its users.
• Sales and Marketing Strategy: Detail your plans for acquiring customers, generating leads, and marketing your product. This can include content marketing, SEO, paid advertising, and your sales channels.
• Product Development Roadmap: Outline how you plan to develop your SaaS app and improve it over time. This should include key phases like ideation, MVP development, beta testing, feature enhancements, and ongoing maintenance.
• Financial Projections: Provide estimates of profitability and funding requirements. If you need external funding, explain how you plan to use the funds to grow your business.
• Team Members: List your team members, their roles, qualifications, and expertise. If there are any gaps in your team, mention your recruitment plans.
• Milestones and Key Performance Indicators (KPIs): Identify the milestones you want to achieve and the KPIs you will use to track progress. These could include goals for user acquisition, revenue targets, and churn rates.
• Risk Analysis and Mitigation Strategies: Discuss potential risks and your plans to manage or mitigate them. Include contingency plans to show you are prepared for possible challenges.

Step 7. Choose the Right SaaS Development Team

When you need software development specialists to build a SaaS product, you have three main options:

Hiring Freelancers

This choice is great if you're looking for the most cost-effective way to build your SaaS product. Freelancers can offer lower prices, but there can be concerns about reliability. The quality of work from different freelancers can vary a lot. If you hire someone whose work doesn’t meet your standards, you may end up spending more time and money on revisions.

In-House Development Team

This option gives you complete control over the development process. You can manage everything directly. However, having an in-house team can be expensive. Costs include software licensing, hardware, taxes, salaries, and other compensation.

Outsourcing to a Software Development Company

This choice helps you avoid the high operating costs mentioned earlier. Outsourcing requires a dedicated team of experts, including software developers, UX/UI designers, quality assurance engineers, and project managers. They have experience in creating reliable cloud-based products. They will also ensure that your product meets industry standards and suits your specific business needs.          

How Much Does SaaS Development Cost?

Let's estimate the cost of creating a basic project management and collaboration platform for small to medium-sized businesses. The basic and essential features of your SaaS app include user authentication and role management, project and task management, file and document sharing, team chat and messaging, dashboard, and reporting, a mobile app for iOS, and integration with Google Workspace for email and calendar synchronization.

Suppose you are hiring a team from Europe to develop this platform. Here are the estimated costs for each team member:

• Product Manager: $10,000-$16,000
• UI/UX Designer: $9,000-$13,000
• Front-end Developers: $25,000-$45,000
• Back-end Developers: $25,000-$45,000
• QA Engineers: $15,000-$25,000 each
• Mobile App Developer (iOS): $25,000-$47,000

The cost of using Amazon Web Services (AWS) can vary greatly depending on usage and the specific services chosen. For a small to medium-sized SaaS application, the monthly cost might be between $1,000 and $3,000.

Therefore, the total estimated cost for developing this SaaS platform (excluding AWS costs) ranges from $174,000 to $396,000. It's important to note that this estimate does not include other expenses like legal and compliance fees, marketing costs, ongoing operational expenses, or post-launch support.

Conclusion

We hope this guide has helped you understand how to build a SaaS app efficiently and cost-effectively. The SaaS model has many advantages over traditional software. These include recurring income, low initial costs, scalability, global reach, automatic updates, and strong security measures.

If you are looking for an experienced SaaS software development team, Mtoag Technologies is ready to assist. We have a proven track record of building various cloud solutions across different industries. This means we know how to create a SaaS solution that meets the highest business standards.

FAQs

What Does SaaS Mean?

SaaS stands for Software as a Service. It is a way of delivering software over the Internet. Instead of installing software on your computer, you access it through a web browser. SaaS allows users to use applications online without downloading or maintaining them.

What is SaaS Development?

SaaS development is the process of creating software applications that are delivered over the internet as a service. This involves designing, coding, testing, and maintaining software that users can access online. SaaS developers focus on making sure the software is reliable, secure, and scalable. They use cloud technologies to build and deploy these applications, ensuring they meet the needs of their users.

What is An Example of SaaS?

An example of SaaS is Microsoft Office 365. Instead of purchasing and installing Microsoft Office on your computer, you can subscribe to Office 365 and use applications like Word, Excel, and PowerPoint online.

Is Coding Needed for SaaS?

Yes, coding is needed for SaaS development. Creating a SaaS application involves writing code to build the software's features and functionalities. Developers use programming languages like JavaScript, Python, and Ruby to create the application. 

Can SaaS be a Mobile App?

Yes, SaaS can be a mobile app. Many SaaS products are available as mobile applications, allowing users to access the service from their smartphones or tablets. This provides flexibility and convenience, as users can use the service on the go. 

Does SaaS Use AI?

Yes, many SaaS applications use AI to enhance their functionalities. AI can be used for various purposes, such as automating tasks, providing personalized recommendations, analyzing data, and improving user experiences. For example, AI-powered chatbots in SaaS applications can provide customer support, while machine learning algorithms can analyze user data to offer insights and predictions.