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.

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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.

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“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.”

Mykola Pyvovarov, Delivery Manager, QArea

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.

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“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.”

Olexii Pavliuk, Delivery Manager, QArea

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.

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“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.

pivovarov

“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.”

Mykola Pyvovarov, Delivery Manager, QArea

Your strong product idea plus our flawless execution equals a successful SaaS product.

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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.

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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. 

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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:

  1. How complex is the solution going to be and how much functionality is it going to include?
  2. Are there any tight deadlines to follow?
  3. What is the projected number of users right after the launch and a year from then?
  4. Is the solution going to be primarily available on desktop devices or is mobile presence also an important feature to have?
  5. What comes first, the technical finesse of the solution or meeting your business goals?
  6. Are you planning to regularly add new features to the product or is it going to be distributed as-is throughout its run?
  7. 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?
  8. What is the easiest, least resource-intensive way to bring your ideas to life?
  9. Is your product going to require special licensing or standardization — for example, if you’re working in the healthcare or government segment?
  10. 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.

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