How to Develop a SaaS Application: The Complete SaaS Development Guide
SaaS application development has been a hot topic in the software community for several years now. The idea of developing a product and then making money with it month after month seems very enticing. But what should a prospective SaaS business owner know before attempting to venture into this competitive market?
Global spending on SaaS products steadily grows consistently: the SaaS market size has gone from $31.4 billion in 2015 to $197.29 billion in 2023. Some of the biggest market players include Adobe, Salesforce, Intuit, Microsoft, and ServiceNow. Still, even now that there are plenty of SaaS solutions for every industry and business requirement, the benefits of the SaaS business model are too powerful to ignore. Here is a definitive guide on how to create a SaaS product, including the composition of the outsourced or in-house development team, SaaS development challenges, and SaaS app development cost.
Definition of a Software as a Service Application
SaaS, or Software-as-a-Service, is a subscription-based model of delivering software and applications over the Internet without the need for users to manage, install, and upgrade the software themselves. In a nutshell, it is developing Software as a service application (e.g., Slack, Dropbox, Gmail, and Google Drive) that replaces offline software and can be accessed from any compatible device. All aspects of a SaaS application are handled by cloud service providers.
SaaS vs. On-Premise Software
Software as a Service is typically viewed as an alternative to on-premise software, and the two are different enough to put companies before a difficult choice: should they use the SaaS model, or should they go for more traditional, on-premise solutions? To answer this question, first let’s look at what on-premise software actually is.
On-premise software and IT infrastructure are always installed, stored, and managed on-site, whereas SaaS is stored and managed using cloud capabilities. Unlike SaaS, which is usually distributed on a monthly or yearly payment basis, on-premise software typically requires a one-time payment.
Moreover, on-premise solutions are not always portable, while portability and the opportunity to use software away from the office are some of the main characteristics of SaaS. At the end of the day, on-premise infrastructure also needs an on-premise IT department to install and maintain the systems, whereas SaaS does not need extensive on-site management and is, therefore, the more lightweight, cost-effective, and accessible option.
SaaS vs. Web Applications
The difference between Software as a Service and on-premise software is absolutely clear: the latter is installed individually on each workstation, while the former can be accessed from any device connected to the internet as long as the user has the required credentials. The difference between Software as a Service and traditional web applications, on the other hand, is much more blurry, as they are both available from the browser.
However, upon closer examination, it is possible to determine the difference between these two types of solutions. The key difference between SaaS products and web applications is that web apps typically have limited functionality and often offer just one major feature, while Software as a Service provides a range of features that can be further expanded based on the subscription plan chosen by the customer.
Architecture Used for SaaS Software Development
Various SaaS solutions can differ not only in purpose or business model but also in type, which is an important factor to consider in the process of building SaaS products. The modern software industry distinguishes between horizontal and vertical SaaS solutions, as well as multi-tenant and single-tenant architecture. Here is what all those types entail and how they differ.
Vertical SaaS
The vertical SaaS definition says that it is unique software designed to solve the needs of an individual market. It can help with several problems. They can be used anywhere from healthcare to finance. Today, they are becoming increasingly popular, allowing for the solution of many business issues.
Practice shows that vertical companies can be more flexible and inventive as they use many AI and machine learning features. It doesn’t matter if it’s a new or old project; interest in it is growing as it can prove it can do the job it was designed to do.
Horizontal SaaS
The horizontal SaaS definition says that this software is for many customers. It doesn’t focus on one industry, but makes products that many people cross-industry can enjoy. Typically, the clients of such organizations are people with different goals and needs, which gives access to a considerable number of potential clients.
Single-Tenant
Under the single-tenant SaaS platform’s infrastructure, each customer uses their separate unit of the software. In that case, the data produced and stored by the user is highly secure, but a single-tenant architecture is often difficult to develop and to maintain, and its scalability opportunities are limited as well.
Multi-Tenant
Multi-tenant architecture in SaaS platform development means that users within the same group or organization use the same unit of the software, while the data they produce and access is stored and maintained separately for each user. Multi-tenant architecture is scalable and practical, as creating SaaS units becomes easier and faster. Multi-tenant architecture can include one or more databases, depending on the number of users.
Types of SaaS Applications
The nature of SaaS apps is multi-faceted, and they can be categorized not only based on their architecture or availability, but also based on the tasks they help complete. Here are the most in-demand solution types to consider when developing SaaS applications:
- Project Management. Many popular project management and collaboration tools, such as Jira, Trello, and ClickUp, are available on a SaaS basis, minimizing the distribution and setup time.
- Communication. Most of the communication tools used by businesses and individual users these days belong to the SaaS segment. This includes Slack, Zoom, Microsoft Teams, Skype for Business, and more.
- Enterprise Resource Management. ERP solutions are widely used by organizations of all sizes, and popular options like Oracle, Microsoft Dynamics, and SAP, are available on a SaaS basis.
- Customer Relationship Management. Many CRM solutions also belong to the SaaS segment for their wide accessibility and ease of use. This mainly includes HubSpot, Salesforce, and Microsoft Dynamics 365.
- Accounting. For startups and SMBs, SaaS-based accounting software like FreshBooks or QuickBooks provides an affordable, hassle-free, and secure way to manage the company’s accounting needs.
- Billing. An eCommerce store or another business that deals with online payments will appreciate the convenience and reasonable cost of SaaS billing systems like Stripe and PayPal.
- Human Resource Management. HRM is one of the newer segments of SaaS app development, but it has already gained popularity for combining robust functionality with affordable costs.
How to Launch a Software as a Service Business
SaaS product development is a complex process, and even if you already have some experience in building SaaS or other software products, there is no guarantee that that experience will be enough to successfully guide you through the process. The exact sequence of steps depends on the product specifics, but certain things are universal for every SaaS application development project.
1. Conduct Market Research
“… You need to know your audience. You need to solve a pain point for them, and ideally, it’s going to be a pain that they are just dealing with without even seeing it as a problem.”
Andy Ide, Founder of HorseRecords
This step, ideally conducted by a business analyst or someone with extensive experience in the SaaS industry, can bring you a lot of valuable insights: whether your business idea is actually good, which business model is the most effective one, who your closest competitors are and what makes them stand out, and which industry and field you should be working in.
“In my experience as a Delivery Manager, I’m witnessing significant growth in two SaaS domains. The first one is healthcare, where both patients and providers want to simplify the operations, make them more autonomous, and further improve the telemedicine field. The other one is eCommerce, where individual entrepreneurs and small businesses can take advantage of the SaaS technology instead of developing expensive proprietary software.”
2. Choose Your Business Model
At first glance, all SaaS products seem to share a similar distribution model, being available on a regular payment basis. However, there are several business models available in the SaaS field, allowing their owners to earn revenue in different ways. Specifically, you can choose from the following models:
- Freemium
- Flat-rate
- User number-based
- User tier-based
- Feature-based
- Storage-based
To find out more about the business potential of Software as a Service and how to maximize your earnings as a product owner, make sure to check our longread.
3. Define the Requirements
Once you know for a fact who your future SaaS product is for, it’s time to select the requirements that are crucial for your solution. For example, you should consider how many users your application should be able to serve at once, whether it’s going to need any security mechanisms that are stricter than usual, whether the customer will be able to modify the selection of features or the application will be distributed as-is, and so on. This will impact your business model, software architecture, and other parameters.
4. Prioritize the Features
When developing a new SaaS solution, it’s very tempting to add as many features to it as possible, hoping that one of them will become the killer feature and help you quickly grow your user base. However, it’s important to prioritize the features taking into account customer preferences. One of the most popular approaches to feature prioritization is the Kano model, which breaks down all possible features into five categories: threshold attributes, performance attributes, excitement attributes, indifferent attributes, and reverse attributes. All of these features may impact customer satisfaction, albeit in different ways, so prioritization is important.
5. Assemble the Team
A lot of your future success as a SaaS business owner rides on the functionality, quality, and security of the software. This is why the actual job of SaaS software development should be entrusted to a team with proven expertise and industry knowledge. Unless you have a complete team of experts at your disposal, assembling a dedicated team with a product mindset can also be a great solution. You may need software developers, QA engineers, a business analyst, a project manager, UI/UX designers, and possibly other team members.
“To me, one of the most integral members of a SaaS development team is a product owner, who is responsible for the big picture and chooses the direction of the process. It’s even better when the product owner is working on the development team’s side — that way, they are perfectly aware of how the work on the project is going and can successfully communicate the needs of the developers to the business owner and vice versa.”
6. Develop an MVP
Developing a prototype or an MVP is something usually reserved for startups. Still, even established companies can benefit from creating a lean MVP and later developing it into a fully functional solution. An MVP is a cost-effective, savvy way to ensure the viability of your business idea, better define the functionality and audience of the product, and avoid the situation where you invest too much money in an idea that does not resonate with the customers at all.
7. Develop the Product
The next big step is developing a full-fledged SaaS solution that is based on the MVP and the lessons learned at the previous stages. By this time, you and your team need to have a complete understanding of what the product should do, how you are going to market and distribute it, how to attract customers and how to make them stick around, and so on. This is the stage where the expertise of your development team plays a crucial role, as they are the ones who can deliver a flawless product with optimal use of your resources.
“Once the product is ready, businesses should consider marketing their SaaS solutions to potential customers to reach out to the right target audience. Companies should leverage both digital and traditional strategies such as social media campaigns, email outreach, content creation, targeted advertising, and more.”
Benjamin Okyere, Founder at StressReliever
8. Maintain and Improve the Application
As soon as you close the deal with your first customer, you sign up for continuous support and maintenance. The exact terms of the support can be stipulated by the user agreement or depend on the payment plan. However, it’s your responsibility as a vendor to provide customer support and to maintain the application in optimal condition. Moreover, to avoid stagnation, it’s essential to regularly update the application, unveil new functionality, improve the look and usability of the app, and extend its availability on different platforms.
“One of the best ways to know where the product is standing with customers, what works and what doesn’t, and see all the possibilities to improve it is to use customer feedback. However, most users will only leave feedback when they are extremely dissatisfied with the product. And the number of users who take the time to leave positive feedback is even lower. This is why making the feedback collection mechanism as easy, streamlined, and quick for the user as possible is vital. Offering rewards in exchange for feedback is also a good idea.”
Your strong product idea plus our flawless execution equals a successful SaaS product.
SaaS Development Team: Key Roles
It takes time and effort to create a SaaS application that delivers results and accurately solves users’ problems. We understand how often the results are heavily reliant on the team you are working with, and how great product ideas are nothing without flawless execution.
A high-quality product is directly dependent on the development team’s expertise and experience, as well as getting the right people for the job, meaning you need to already have at least a preliminary idea of the technologies you’ll use and the business logic you want to implement before making any hiring decisions.
As a SaaS development company, we have perfected the SaaS development team structure to the point where it works like a well-oiled machine and allows us to build a SaaS application from scratch in minimum time:
- Project manager
- Business analyst
- UX/UI designer
- Front-end developer
- Back-end developer
- QA engineer
Project manager
The role of the product manager in building a SaaS product is to manage the work process and ensure things are systematic and nothing is missed. PMs make sure everyone in a team is on the same page, things are getting done, and the product is delivered on time.
Business analyst
A business analyst is responsible for understanding and gathering business goals and translating them into requirements. This specialist begins their work early in the development journey and then offers their expertise throughout the entire software development project. Business analysts track the work process and connect the client and the team, providing suggestions of what else should be added during later stages of development.
UX/UI designer
The goal of user experience/ user interface designers is to transform visions of a product into user-friendly designs. UX is concerned with designing the whole experience a user is going to have with the product, whereas UI is only concerned with the aesthetic experience (icons, buttons, colors), which is especially important when you create Software as a service products, where many users value design as much as functionality and content. SaaS application design is an integral aspect of the SaaS web app development process.
Front-end developer
Your dedicated development team may miss some of the roles we’ve listed, but it will always include developers as an integral component of the software development process. Specifically, a front-end developer’s role in a SaaS team is to participate in a cloud-based product development cycle and create the part of the product that users interact with, ensuring it operates well on any platform and device that it is required to.
Back-end developer
Back-end developers write all of the code that runs on the server side and is not visible to a user. They get the environment set up, plan the database, and code the product. You cannot build a SaaS platform without an experienced back-end developer, or even two, with relevant SaaS development expertise, since different SaaS systems may necessitate different developers with different responsibilities.
QA engineer
While the developers will help you build a SaaS solution, QAs will make sure that your SaaS product performs according to the requirements. They incorporate manual and automated tests in the quality assurance process on all levels of the product, looking for functional and non-functional defects.
In short, it is impossible to imagine how to build a SaaS application without working with an experienced team that is involved in all aspects of the product life cycle, from design and support to maintenance and further development.
In-House Development Team vs. Outsourced SaaS Development
When you already have an entire team of experienced SaaS developers, QA engineers, business analysts, and UI/UX designers, then the decision to develop the solution in-house is a no-brainer. However, if all you currently have is an idea for a SaaS product, then you will likely face the choice between hiring an in-house development team from scratch or outsourcing the entire development project to an outside vendor.
Outsourcing SaaS development has many advantages over traditional in-house development: you can easily find workers with rare expertise without spending months hiring and onboarding new team members. You can also frequently find complete outsourced teams that have worked together on previous projects and have the rapport and communication down to a tee, allowing them to start with no delays and with maximum efficiency.
Still, at the end of the day, the question of whether or not to outsource comes down to the question of price. Outsourcing is famously a cost-effective alternative to local hiring: where local engineers may charge $50 per hour, a developer in Eastern Europe or Asia will charge $25 per hour, so the entire outsourced project can cost you twice as little as developing it in-house.
Moreover, outsourced cooperation is typically project-based, so you don’t need to employ any specialist longer than needed to finish the project. After that, you can scale your team down to just a couple of engineers for ongoing support and maintenance. So, from the financial and practical standpoint at least, outsourcing is definitely the more sensible option.
Assemble your perfect development team and start building your SaaS product in under 10 days.
How to Choose the Right Tech Stack for Building a SaaS Platform
There are two important things to know about the tech stack for a SaaS-related project, whether you’re outsourcing SaaS development or doing everything in-house. First, there isn’t a one-size-fits-all technology stack that is equally applicable to every single SaaS project. Second, the technologies you use for developing a SaaS solution determine many of its key points, from functionality to performance and scalability.
At the same time, Olexii Pavliuk, our Delivery Manager, believes that the choice of a tech stack isn’t the most important choice a SaaS product owner has to make simply because it’s possible to accomplish the same goals by using different sets of technologies.
Before you and your development team make any choices regarding the technology stack, answer some questions about your SaaS idea and your plans for executing it:
- How complex is the solution going to be and how much functionality is it going to include?
- Are there any tight deadlines to follow?
- What is the projected number of users right after the launch and a year from then?
- Is the solution going to be primarily available on desktop devices or is mobile presence also an important feature to have?
- What comes first, the technical finesse of the solution or meeting your business goals?
- Are you planning to regularly add new features to the product or is it going to be distributed as-is throughout its run?
- What kind of a skill set does your development team possess and are you going to need to hire additional personnel to implement your ideas?
- What is the easiest, least resource-intensive way to bring your ideas to life?
- Is your product going to require special licensing or standardization — for example, if you’re working in the healthcare or government segment?
- Do you consider the learning curve and community support to be important factors for selecting the tech stack?
It goes without saying that unless you, as a product owner, have deep technical knowledge, some of these questions are impossible to answer on your own. This is why we are once again stating the importance of having not just a brilliant SaaS business idea, but also an equally brilliant team to execute it.
In most cases, a SaaS software product consists of the front-end, back-end, server, and database parts, as well as cloud hosting. Popular options for the front-end part of the application include JavaScript-based frameworks such as Angular, React, and Vue.js, which are perfect for developing browser solutions with universal accessibility.
For the back-end part, many developers choose PHP for its relatively easy learning curve and due to the fact that PHP developers typically cost less to hire than other back-end engineers. Other popular choices include .NET, Node.js, and C#.
The choice of database and server technologies primarily depends on the skill level of the development team and what is expected of the solution at the end of the development process. Moreover, many SaaS developers now choose in favor of mobile-friendly technologies such as React Native, Flutter, and Ionic, given that the number of mobile SaaS users is constantly growing and users have come to expect spotless mobile performance as a feature.
Finally, for the hosting part of the application, a cloud-based SaaS application developer will usually go for services with a robust variety of features and proven reputation, so that there is a powerful foundation for developing a SaaS web application. The most popular options here include Amazon Web Services, Microsoft Azure, Google Cloud Platform, DigitalOcean, and IBM Cloud.
“The idea always comes first, and the execution follows the idea. The developer does not explain to the UI/UX designer or business analyst how the application is going to work — it’s the other way around. The UI/UX specialists fully conceptualize the look and logic of the application, and the development team must find a way to make it happen.”
How Much Does It Cost to Build a SaaS Product?
We’ve already talked about the benefits of SaaS applications and the steps of SaaS development. Now let’s talk about the application development cost and what exactly factors into it. Let’s start with the factors influencing the cost of a SaaS product:
- Business logic. This includes the complexity of the solution, the desired functionality, the projected number of users, the opportunities for scalability, and so on.
- UI/UX design. Whether your future SaaS solution is intended for all kinds of users or only for a specific company or industry, a user-friendly, accessible UI/UX design is crucial.
- Technical features. The technical factors affecting the cost include the choice of a SaaS architecture, the tools used for development, the complexity of security features, and so on.
- Integrations. Many companies that use SaaS products are not fully aware of all the integrations that come with the solution, and there can be dozens of them implemented in the product, through APIs or otherwise.
- Infrastructure. SaaS solutions don’t work in isolation: in addition to APIs, which can also be distributed on a SaaS basis and therefore cost money, there is also paid hosting to take care of.
- Project duration. If your team is employed on a per-project basis, then the duration of the project also comes into play, especially when working on the time and material or dedicated team basis.
- Team size and location. The size of the team understandably factors into the cost of SaaS development, adding the salary of each team member to the overall budget, but the location matters too: Eastern European or Asian development teams typically charge significantly less than their Western counterparts.
Depending on the complexity of the application, the technologies used, and the team involved in the project, developing a SaaS application can take between two and six months, while the price can range from $50,000 for an MVP version to $500,000+ for a complex, unique application with robust functionality, universal compatibility, and endless scalability opportunities.
Building a SaaS application? Find out about our expertise and how we can help!
Stages of a SaaS Product Business
When it comes to SaaS business development, there are different approaches to dividing the process into stages. Some approaches are based on funding stages, while others measure the current stage of a SaaS business by the number of customers or the amount of revenue. However, the most common approach divides the SaaS development process into four stages: pre-startup, startup, growth & scaling, and maturity. Here is what you should know about these four stages.
Pre-Startup
This is the initial stage of the SaaS development process. At this stage, the team behind the product conceptualizes the idea and seeks the answer to the question: “Which customer problem is our product going to solve?” This stage can include assembling the core team, communicating with prospective customers about their pain points, establishing business relationships, securing funding, prototyping the solution, and building the MVP.
At the pre-startup stage, it’s crucial not just to develop a strong SaaS idea, but also to identify the business models that will support it. Moreover, when the team receives the initial funding, it’s vital not to overspend it on non-essential things and not to depend on it for too long.
Startup
The startup stage is also often referred to as the product/market fit stage, as finding the perfect product/market fit is the primary objective at this stage. While at the startup stage, the owner should also be able to offer the customers a usable version of the product and see if the customers engage with the product and if the acquisition process goes as planned.
At the same time, the startup stage doesn’t rule out pivoting in the name of achieving the perfect product/market fit. This is not the stage to think of growth and scaling; this is the stage to finalize the functionality, look, and target audience of the product to ensure adequate development in the later stages of the process.
Growth & Scaling
The SaaS growth stage is the stage where you can stop for a second to pat yourself on the back for getting this far but then quickly return to working just as hard as you did before or even harder. By this time, SaaS companies already have a stable revenue stream and effective ways to attract leads and turn them into customers. Turning revenue into profitability is one of the most important steps in a SaaS growth strategy.
The other important step is scaling: attracting new customers and increasing the capacity of the application to make sure it can handle the increased usage. Companies often require additional funding at this stage. However, it’s vital to maintain the right balance between scaling speed and expenses, as there is a risk of trying to scale too early and losing investor money as a result.
Maturity
This is the fourth and final stage of SaaS product development, and it’s usually the longest one. At this stage, the team behind a product can say with confidence that they’ve made it. There is a stable product, a loyal customer base, and a predictable revenue stream that generates profit for the company.
The growth may slow down at this point, but it should not stop completely; otherwise, the business may stagnate. If projections show that achieving significant growth in the domestic market may prove challenging or impossible, the team may want to focus on venturing into foreign markets, provided that there is a thorough understanding of the specific market requirements, regulations, and even unwritten rules.
Important SaaS Metrics to Track Success
Like any other business, a SaaS business has a selection of metrics that demonstrate how well the product is doing and show the areas that can be improved. Tracking those metrics is an essential part of running a SaaS product development business, while ignoring them will lead to the owner losing track of the state of the business and having to deal with increasingly complex issues.
The exact set of SaaS metrics depends on the specifics of your solution, such as the industry, complexity, business model, and time in the market. However, some metrics are universally applicable, regardless of the project parameters. Here are the key metrics for SaaS to track when running a SaaS business:
- Churn rate. This metric refers to the number of customers your business lost over a specific time period. A steady churn rate is to be expected, but when there is a significant drop over a short period of time, it’s definitely something to discuss with the team.
- CES. CES, or Customer Engagement Score, is a metric that demonstrates how much and how exactly your customers engage with the product: how often they launch the application, which features they are using, how much time they spend interacting with your app daily/weekly, and so on. The logic here is that the more actively the users are engaging with your solution, the less likely they are to churn.
- CAC. CAC, or Customer Acquisition Cost, is one of essential metrics for new SaaS businesses. It demonstrates how much exactly it costs for the company to acquire one user and is calculated by adding up all the money you’ve spent on sales and marketing and dividing that number by the number of acquired customers.
- CLV. CLV, or Customer Lifetime Value, is the total amount of money a single customer brings to your company for all the months/years of using it. This metric shows you what your average customer is worth to your company, so that you can plan your marketing and sales spending accordingly. For a startup, this metric can also demonstrate the viability of your business to a potential investor.
- Months to recover CAC. This metric is responsible for calculating how many months it takes the company on average to break even after acquiring one customer. For example, if you’ve spent $5,000 on acquiring the customer and their total bill comes down to $500 per month, you will start making a profit from that customer ten months after the acquisition date. Ideally, the longer you spend in business, the lower this metric should become.
- K-factor. K-factor is an important metric that quantifies the virality of a new product or application and demonstrates the growth rate of new clients generated by each existing user. K-factor is not a financial metric, but it helps to estimate how many new customers are acquired through personal recommendations from existing users. Thus it can be a crucial component in assessing the potential for growth in marketing and product development.
Best Practices of Growing a SaaS Solution
A brilliant SaaS business idea and an equally brilliant execution can create an innovative, powerful product. However, without an effective SaaS growth strategy, all the time and effort spent on SaaS application development can go to waste. Here are the best practices, tips, and hacks for SaaS growth:
- Engage with your audience. In order to be trusted by customers, you first need to be recognized by them. One of the most effective ways to do it is to build a loyal community around your brand on LinkedIn or another social media site. Your social media presence has to provide a lot of value to its members, so avoid making the content overly promotional. You can also offer freebies and exclusive deals to your subscribers.
- Provide a free trial. Free trials are one of the best ways to convince the customers that your product is worth their time and money. Users are not very likely to pay a substantial amount of money for an unknown product from the get-go, especially if it’s completely unique and doesn’t have close competitors. A 14 or 30-day free trial works wonders for customer acquisition.
- Introduce a referral system. Referral systems allow a SaaS business to kill two birds with one stone: increase the loyalty of existing customers with the help of rewards and grow the customer base with referrals. The reason why referrals work so well is that a potential customer is much more likely to trust someone they know personally than an unknown brand. And the fact that it costs you significantly less than other forms of promotion is a nice bonus.
- Educate your customers. A customer who is well aware of the specifics and benefits of your product makes a more loyal user than someone who discovered you out of the blue. These days, there is no shortage of education opportunities, from webinars and podcasts/interviews with industry leaders to recruiting brand ambassadors and allowing them to do the educational work for you while promoting the brand.
- Partner with other vendors. Collaborating with other software vendors may seem counterintuitive when it comes to promoting a SaaS business, but the key here is to pick products that work in the same field but are not your direct competitors. Together, you can create discounted bundles and offer the customers more bang for their buck while getting your brand better recognition.
SaaS Application Development Challenges
By all accounts, SaaS application development is one of the most attractive software niches to join right now, and the current rate of SaaS growth will only continue. But that is not to say that SaaS business owners don’t face their own challenges, or that every SaaS business idea is bound to survive and become a never-ending source of revenue for its owner. When you decide to build a SaaS app, you should be aware that it’s a complex process that requires a lot of consideration and can also trigger certain issues. Here are the most common SaaS business challenges owners can potentially face:
- Customer retention issues. When you have a powerful SaaS business idea, convincing customers to give your product a try isn’t the hardest thing to do. The hard part is to get them to stay. Product owners can use a variety of methods, from offering bonuses and freebies to long-time customers to regularly updating the application and adding new functionality. Releasing a product and then sitting back and relaxing for a few years is not a good SaaS growth strategy.
- Security compliance. These days, customers trust SaaS products with the most sensitive information, from client data to financial management. Moreover, many SaaS products operate in industries that require strict compliance with security standards, laws, and regulations. This creates an additional challenge for SaaS companies operating in those domains, as just one misstep can derail years of development.
- Wrong choice of monetization models. A SaaS business needs to generate revenue for its owner, but there are several ways to make money with a SaaS solution, and they are not interchangeable. When the most appropriate business model is to provide ad-supported free access and you are trying to sell the product through a paid subscription, it’s going to make users look for an alternative solution.
- Wrong choice of technology. We’ve already talked about the importance of the right tech stack earlier in this article, but it simply cannot be overstated. The technological stack impacts the look and feel of the application, its functionality, performance, security, scalability, and other essential parameters of a SaaS product. When your solution isn’t able to accommodate the growing number of users due to poor scalability, the wrongly selected tech stack is to blame.
- Regular acquisitions. Market consolidation is one of the leading trends in the software industry, with tech giants acquiring various software products, including SaaS, day in and day out. And when a product from your niche gets acquired by someone like Microsoft or IBM, with nearly unlimited resources for growth and development, the balance of power in the niche shifts completely.
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SaaS Application Development Challenges
“At present, there does not appear to be anything that could replace Software-as-a-Service, as many businesses continue utilizing this technology due to its numerous benefits such as cost savings, scalability, efficiency improvements, and agility when compared against traditional models like on-premise deployment methods or managed services offerings.”
Jamie Irwin, Director & Search Marketing Expert at StraightUpSearch
Software as a Service is one of the most rapidly developing industries that has come a long way since its inception. Every year brings several new noteworthy trends to the SaaS industry, and this year, although it’s just started, is no exception. Here are the five SaaS trends that will shape the industry in the coming year and can help you design a SaaS product to ensure your bright future in the world of software:
- The rise of micro SaaS solutions. This trend proves that you don’t need a large and complex solution to venture into the SaaS business, as the SaaS model allows plenty of flexibility. Even a small solution that is based on a unique idea that resonates with customers can successfully kickstart a SaaS business. It can be something as seemingly simple but indispensable as a browser extension.
- AI as a feature. Artificial intelligence has been one of the key selling points in many successful SaaS solutions over the past few years, but these days, customers have come to expect AI to be more heavily featured in their favorite products. AI use can include anything from replacing the background in a photo to writing copy for different purposes based on the prompt.
- The growth of vertical SaaS companies. The battle between horizontal and vertical SaaS structures has been one of the most prominent ones in the industry and it’s expected to continue next year, with the vertical SaaS model catching up in popularity. Many SaaS vendors now feel that focusing on one industry instead of spreading themselves too thin across multiple industries is the more effective strategy.
- Gradual shift to PaaS. SaaS solutions provide customers with a quick way to satisfy their business needs. However, to some customers, especially at the enterprise level, Software as a Service proves to be limiting with time. Platform as a Service solutions, on the other hand, are more flexible and suitable for wide customization and scalability, which is why they are now the preferred choice for many customers.
- Creative marketing strategies. Developing a SaaS solution isn’t overly complicated, especially when you are a SaaS startup with fresh ideas and a reliable team of developers on your side. However, with so many great SaaS solutions out there, it’s the distribution of the product that can often prove to be challenging. And regular promotion methods such as Google and Facebook ads are expensive and don’t always help reach goals fast. This is why SaaS companies now actively invest in SEO, content marketing, and out-of-the-box marketing strategies.
“I strongly believe that every SaaS company can benefit from an experienced marketing specialist with relevant industry experience. Sure, the development team can implement a few plugins for better SEO visibility, and you can also use the services of an SEO specialist. However, only a marketing specialist can design the most effective promotion strategy, ensure rapid growth, and decrease churn rate.”
Final thoughts
Although the adoption of the SaaS model progresses at a rapid pace, the Software as a Service market is definitely a saturated one, and there are tons of fantastic applications already, there is always room for newcomers. The main requirements for making it big in the SaaS market are a strong application idea, an experienced team that will execute that idea, and deep knowledge of the market to design the most effective growth strategy. Hopefully, our tips and insights will help you turn your SaaS business idea into a product recognized for its quality and innovation.
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- How to Launch a Software as a Service Business
- SaaS Development Team: Key Roles
- How to Choose the Right Tech Stack for Building a SaaS Platform
- How Much Does It Cost to Build a SaaS Product?
- Stages of a SaaS Product Business
- Important SaaS Metrics to Track Success
- Best Practices of Growing a SaaS Solution
- SaaS Application Development Challenges
- SaaS Application Development Challenges
- Final thoughts
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