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SaaS products are conquering the market. Companies worldwide are switching to cloud-based solutions, and by 2030, the SaaS market in the US is expected to reach $908.21 billion, according to Fortune Business Insight.
If you're a startup entrepreneur or product manager wondering, "How can I build my SaaS product?" we've got the answer. In this article, we dive into the discovery and development process of SaaS applications. You'll learn a lot about the SaaS business model and how development team of SaaS applications works.
Continue reading to learn how to make a SaaS product that your customers will love.
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What Is SaaS Application And How Does It Work
Software-as-a-Service (SaaS) is an internet-based software solution. It is sold by SaaS providers to customers on a subscription basis, with all features accessible online. Users do not need specific desktop applications or hardware, as all the features and data are hosted on dedicated servers.
In most cases, the SaaS product owner, officially called an independent software vendor (ISV), hires a third-party cloud provider to host the application.
SaaS is one of the categories of cloud computing, along with infrastructure as a service (IaaS) and platform as a service (PaaS).
Who are the clients of the SaaS business?
The core advantage of SaaS software is its flexibility. So, it can be used in various industries, from entertainment and communication to e-commerce and enterprise IT solutions.
SaaS products can target both B2C and B2B clients, depending on the problems they solve. B2B clients also vary, so SaaS entrepreneurs can take advantage of offering different pricing plans that meet the needs of both startups and larger companies.
Let's analyze the SaaS business model and evaluate its advantages and disadvantages.
SaaS Model for Business: Benefits and Pitfalls
SaaS products are very attractive for customers. Many users prefer to pay for applications as they use them rather than buy them outright. The software provider handles all aspects of the app - from building to configuring and updating.
Customers usually pay monthly or yearly. This SaaS products' multi-tenant environment allows customers to share the cost of maintenance and updates to get a high-quality product.
Benefits of Software as a Service Business Model
1. Cost-Effective Development
When SaaS software is built, it is ready to go in the cloud. It avoids delays as in traditional software deployment, where there can be extra time and expenses for dealing with unexpected problems on the client's end.
Another advantage of SaaS development is the ability to start with a small set of features to launch a product quickly. While the entire software development process takes time, the first minimum viable product (MVP) can be ready within 2-3 months.
2. Consistent Revenue
SaaS software businesses can offer short free trials to attract leads and grow their customer base. It allows potential customers to experience the product's benefits before purchasing.
The subscription-based model of SaaS provides a steady revenue stream, making it appealing and stable for investors.
Furthermore, the SaaS model usually shows good customer retention rates as users prefer services that consistently deliver desirable results at an affordable price.
3. Flexible Updates
The provider can host and manage the entire software. So, it's much easier to update regularly without users needing to manually update or maintain their hardware. It is a key to SaaS success. You can continuously improve the app and respond quickly to changing customer needs and consumer market trends.
Explore more: Top SaaS companies and solutions for various business needs
4. Scalability
Software as a Service product is designed to handle a growing number of users. It is easier to scale in the cloud than on local servers. The cloud infrastructure providers allow SaaS entrepreneurs to increase storage or bandwidth when needed.
When the costs of scaling exceed the budget, product owners can adjust their pricing plans. It helps them manage additional expenses and reach new customer segments.
Pitfalls of Software as a Service Model
Along with these attractive benefits, building products in the cloud also has risks. Let's look at them closer.
1. No Upfront Payments
The SaaS model is not adapted to upfront payments. The licenses and implementation only have price once the product is launched and helps real clients solve their problems. If you need upfront income to cover development costs and operational expenses, the SaaS model may not be the best choice.
2. Less Control Over Data
Software as a Service owner can't control all data since it's often stored on the cloud provider's servers. However, compared to localized storage, cloud solutions have more robust data security measures. Cloud providers are equipped to handle data threats.
The client's problem is that they can't control software updates or go back to old versions. It means they can lose some of their information during new updates, or the SaaS owner might remove a feature they were using.
3. Need For Ongoing Support
The perfect flexibility of SaaS products has its dark side because it makes it easier for customers to switch to another solution. So ensure you're attentive to your customers' needs and track their engagement.
Customer support service is implied when we talk about SaaS. Since the customer is onboarded, you should help them on every step. Support service is also a great way to get user insights, educate them about your product, and gain loyalty.
Find inspiration in our analysis of the Growth Story Behind Loom, where we described how its founders built a customer-obsessed culture and reached a millionth base of loyal clients.
How to Build an Outstanding SaaS Product: 7 Key Steps
Finally, we get to SaaS application development! Yet, it doesn't kick off with design or code. Let's look at all the stages required in SaaS application development.
Step 1. Market Analysis
During this step, you need to identify your customers, clarify the problem you're solving, explore the market, and see what already exists. This stage will help you validate your idea at a high level: determine if people are interested and ready to pay for it.
Conducting competitor research can also help you discover best practices in your niche and avoid repeating mistakes others have already made.
You should ask yourself good questions as they form the foundation for product-market fit, which is the heart of a successful product.
The primary objective is understanding why customers might choose and enjoy your product.
To gather this information, you can interview potential customers, google extensively, analyze reports, explore what your competitors are promoting, and read what they post.
Consider this as important homework for your project's foundation. You can research on your own or get help from an agency. The project discovery phase will cover part of the research if you work with an outsourcing development partner. Learn more about the project discovery process here.
The result of this step can be embodied in a Product Concept that will serve as a guide for further development, production, and marketing.
Step 2. Plan Your Resources
Building a Software as a Service application requires careful consideration and planning. Before starting, consider three key factors: time, budget, and expertise.
Time
The time varies depending on the project's complexity. It can take from 2-3 months to 6-9 months to build a viable version of a SaaS product. The minimum viable product (MVP) is the initial application version needed for market entry. The MVP should include essential core features and provide value to customers.
Make the most of this time to plan your promotion strategy and acquire your first customers because the primary goal of an MVP is to validate your idea by receiving user feedback and adjusting your next steps.
MVP is only the beginning. If you want to create a solid and complex SaaS product, prepare for a long-term, resource-consuming, but still exciting journey.
Budget
A SaaS product budget typically includes the following factors:
Development costs vary depending on complexity and required features. Allocate a budget for hiring a development team or outsourcing. Ongoing costs may consist of hosting, maintenance, and updates.
Operational costs for running a SaaS business include customer support, server maintenance, and software licensing fees.
Third-party integrations are often used in SaaS business— for example, user verification, billing, or chatbot service.
Marketing and promotion budgets for acquiring new customers may include digital advertising, content creation, social media marketing, and SEO services.
Team and Expertise
In most cases, the SaaS product development involves the participation of the following specialists:
managers (project manager, business analyst),
solution architects,
UI/UX designers,
developers (frontend, backend, mobile),
DevOps,
QA engineers.
Sometimes, specialists can combine multiple roles, and the overall team composition can be scaled up or down. It depends on the budget, requirements, and project stages.
However, it is essential to consider how you can access the expertise needed. Possible solutions include:
Employing an in-house team — suitable for large companies developing a new product or transitioning their business model. However, for small or mid-sized businesses, this can be a time- and budget-exhausting process with challenges in finding and onboarding the right people.
Working with freelancers can be a good idea if you know trusted specialists. This option is relevant for cases where you don't need complex development, consistent app support, and updates. It can be an appropriate solution if you stop enhancing the application after releasing the first few versions.
Hiring an outsourcing development team allows you to trust the development to specialists while you focus on business tasks. The advantage of outsourcing development companies is that they have a pool of talent and established development processes. Quality is guaranteed due to their experience in SaaS development. Moreover, they can dedicate all their resources to development because it's their core function.
Step 3. Design and Prototyping
Before you begin developing your software, it is important to create wireframes and design functional prototypes. They can be helpful if you want to validate some hypotheses with prospective clients and visually present software and its features to investors.
We offer clients a discovery design prototyping session. We have a couple of workshops (up to 7) where we dive deep into problems that the client wants to solve. We do research on competitors and similar platforms within the industry.
When we have enough information, we can work with requirements.
Requirements Gathering
Requirements can be divided into two types: functional and non-functional. Functional requirements define the product's features, while non-functional requirements describe the system's characteristics.
There is no universal set of requirements that will suit every industry. That is why our team always deeply analyzes the client's business and domain to recommend the most relevant features.
The domain analysis and key success metrics that you target in your business should be the guidance when identifying the main requirements for the platform.
However, you can start with some standard requirements for SaaS products:
Security. If you're building a product in the financial or healthcare domain, it's crucial to have strong security measures to protect sensitive user information.
Scalability. If your solution can serve many customers, it's vital to design infrastructure that can accommodate more users and resources in the future.
Performance. In a competitive market, SaaS applications must provide a smooth user experience. Users should be able to easily navigate the platform, complete tasks, and access features without any difficulties.
Integration Capabilities. SaaS businesses often use third-party tools and systems. Therefore, ensuring that the app can easily integrate with other software is crucial.
Prioritizing requirements
You can't implement all the features at once. You can use the MoSCoW method (Must, Should, Could, Won't) or the Kano model for prioritizing.
Such frameworks help you decide which features are crucial for the first version and which can be added later.
For example, in the Kano model, features are divided into four main groups and prioritized in the following order:
Must-be features
Performance features
Attractive ("Exciters") features
Indifferent features (mostly added just because your competitors have them)
Also, include stakeholders and possible users in the decision-making. It ensures that what you're planning matches up with what they want.
Prototyping
And finally, we create functional prototypes. We start by building wireframes to focus on user and data flow.
Next, we move on to high-fidelity design and create clickable prototypes. These prototypes include application screens, interfaces, consistent visual style, and branding.
After this stage, clients can demo or even start preselling their applications.
Step 4. System Architecture Design
Main principles
We design SaaS architecture to be optimized for MVP, match the client's strategy, and allow for future growth. It is designed in a way that enables us to quickly deliver essential features with the highest possible quality.
Our approach helps products enter the market and makes it easy to manage and update the platform for the future.
Reliability is also a top priority. We've talked about customers' growing demands before. Therefore, the system must be designed to minimize downtime and facilitate prompt bug detection and resolution.
The architecture should have sufficient redundancy to ensure high availability and fault tolerance.
There are two widely used types of architecture in SaaS development.
Single-tenant architecture
In single-tenant architecture, every user has a private database and resources. They don't have to share their data. Each application has a separate database. This approach gives greater security but can be more expensive.
Multi-tenant architecture
Multi-tenant architecture is a design approach that allows multiple user groups, known as tenants, to access one instance of an application or system. It's widely used in SaaS and is the preferable solution for long-term purposes.
Each tenant has isolated data and configuration settings, ensuring privacy and security.
The application can handle multiple tenants simultaneously, providing a seamless experience for all. This type of architecture also simplifies maintenance and updates, as changes can be applied to all tenants at once.
It is a scalable and flexible solution for building SaaS applications that can accommodate a growing number of users and meet their unique needs.
Step 5. Product Roadmap and Project Planning
At this stage, we have gathered extensive knowledge about the future product, including its features, business requirements, and architecture. With this knowledge, we can make estimates and create a Product Roadmap that serves as a development plan. This roadmap includes:
scope of work
estimated costs and timelines
delivery plan
product backlog
strategic information.
When timeframes and costs are agreed, we can go on with development.
Step 6. MVP Launch
Technical Stack for SaaS Software
First, the development team selects the technical stack for the software. The tech stack includes programming languages, libraries, frameworks, software, and tools required to build an application. The SaaS software's technical stack consists of both frontend and backend components.
The front end is the part of the software that users see and interact with. Frontend developers use HTML, CSS, JavaScript, and frameworks like React or Angular to create interfaces and client side of applications.
The backend is the server part of an app. Backend engineers use frameworks, libraries, and programming languages like Python, Ruby, PHP, C++, and others. Each language has its purpose and helps achieve desired results.
Another part of the tech stack's back end is a database. Databases store data, records, and files. Popular databases include MySQL, MongoDB, and PostgreSQL.
A server or hosting offers a secure space for integrating and deploying applications. Common babackendervers are Microsoft's Internet Information Services (IIS), Apache, Nginx, etc. However, as cloud infrastructure becomes more popular, many teams opt for Amazon Web Services, Microsoft Azure, and other cloud providers.
DevOps tools are widely used in SaaS development to automate processes, manage complex environments, and build continuous integration and delivery pipelines.
APIs are like connectors that link servers and clients. They help servers fetch essential resources, such as data, and transfer it to the database.
AI/ML algorithms are not necessary, but they greatly enhance SaaS applications. AI/ML can empower you with data, streamlined workflows, and customer personalization.
Every choice of technology heavily depends on software and industry requirements. There is no universal formula that will suit every project. Read an article on this topic: How to Choose the Right Tech Stack for Your Web or Mobile Application.
We consider requirements, deadlines, and the client's budget when forming a technical stack. We can also explore third-party integration solutions to ensure a timely launch for our clients.
For example, we successfully developed and launched an accounting SaaS platform for our clients in just three months. We used Airtable as our backend database solution to meet the committed timelines and budget. After the launch, we switched to a more reliable PostgreSQL.
Development
The development process starts with dividing tasks among team members. We work in an iterative way using Agile methodology. We work in two-week sprints and have demos at the end of each sprint to show the work to the client and get their feedback.
This timeframe helps us identify issues or opportunities for improvement early on. It also promotes collaboration between the team and the client and ensures that tasks are completed within the sprint timeframe.
QA Testing
Throughout the SaaS development process, we regularly review and test the code to ensure its quality. We also encourage continuous integration and deployment to catch any issues early on. This approach allows us to deliver high-quality software that meets our clients' needs.
We also create technical documentation for specific parts of the platform. When launching a platform, we conduct thorough QA activities and run regression tests.
MVP Deployment And Support
After launching the MVP, we enter support mode, giving the client time to collect feedback and data. During this phase, we focus on fixing urgent issues and monitoring the platform's performance to ensure it functions as expected.
At this point, we usually switch to Kanban, another Agile method that is better for managing incoming tasks. Unlike Scrum, which focuses on time-limited sprints, Kanban emphasizes continuous flow and visualizing work progress.
Step 7. Product Scaling
The MVP is a crucial moment for products. The collected customer feedback helps both the SaaS business founder and the development team make informed decisions.
It is a moment to validate the SaaS product idea and fine-tune the development plan.
When we move to the following project stages, we can add the next set of features or reconsider our strategy and introduce something new.
During the transition to a new level of your SaaS app, it is crucial to offer customer support, address their concerns, and stay updated on metrics.
Regular tasks in these areas include:
Analyzing and monitoring data
Gathering feedback from customers
Making product improvements
Providing app support
By undertaking these tasks, you can develop a competitive product that effectively meets your customers' needs.
Final thoughts
SaaS is a growing market, but not every product is guaranteed to succeed. As a business founder, you need to ensure that your SaaS solution meets consumer needs and generates revenue.
It needs learning about the market, knowing your key metrics, and finding a model that generates revenue. It is wise to find a strategic development partner, so you can focus on core business aspects of your SaaS product.
At Design Key, we have built and launched SaaS products in various industries, from online education to finance. We provide technical knowledge and help our clients achieve long-term growth and profitability by conducting in-depth research into market and business aspects.
You can check out our Portfolio or request more examples of our SaaS development cases via the Contact Us page.
Do you need a reliable software development team for your SaaS project? Let's schedule an introductory call to discuss the possibilities of our collaboration.
Frequently Asked Questions
What is a SaaS product?
SaaS, which stands for Software as a Service, is a type of software that can be accessed over the internet without requiring any downloads. Users can sign up for applications hosted on remote servers and enjoy all the features without having to worry about maintenance. This format is similar to renting software instead of owning it.
Who can be a customer of SaaS business?
What are the benefits of the SaaS business model?
Are there any pitfalls of the SaaS business model?
How long does it take to build a SaaS application?
What are the steps to build a great SaaS application?