Software Development As a Service: Benefits, Challenges, and Reasons to Use It

The SaaS market has been on the rise recently. Over the last seven years, it increased quite significantly, jumping from $31.4 billion to $161.71 billion, which indicates a staggering 5x growth rate. In other words, the popularity of this service keeps growing, and there’s no slowdown to it. 

Along with SaaS, new similar solutions appear on the market. One such service that has been gaining traction in recent years is software development as a service (SDaaS). This service has been around for some time, but for many companies, it still remains quite new. 

If you feel confused about this abbreviation too, you’ve stumbled upon the right source. In this article, we’ll tell you everything you need to know about SDaaS, including what benefits this model brings to your business and what challenges may come your way, so you can leverage it to maximize your business success. Let’s start digging.

What Is Software Development As a Service (SDaaS)?

Software development as a service is a strategic approach in which a team of dedicated software engineers contract out their services to clients on a subscription basis. Their spectrum of web development services includes a wide range and spans through all aspects from the planning stage to design, implementation, and post-deployment maintenance.

The beauty of SDaaS is that it doesn’t demand full commitment compared to hiring and managing an in-house development team. You can hire a software team on-demand to implement additional features to the existing software solution or develop a core number of features before investing in a full-fledged software, all while without having to manage a large team. 

Moreover, unlike outsourcing or freelancing, this model is transparent. Since all the costs are agreed prior to development, you know exactly what you’re paying for and what you get at the end of each development cycle. No wonder software development as-a-service has become so popular with startups and SMBs and will continue to grow in the years to come. 

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The Benefits of Software Development As-a-Service

We’ve already brushed upon some of the benefits that software development as a service model brings to the proverbial table. However, it’s only a tip of the iceberg when it comes to the potential advantages it offers. Further down, we’ll investigate the key benefits that businesses get by hiring software developers on-demand. Let’s see what they are:


If you want to scale an existing software solution but don’t have an idea of how big it will be and whether you’ll need to make changes to it once you set off, going for software engineering as a service will be the best strategy. A service provider will assess your development project or service and come up with a business model that will best suit your goals. 

In addition, collaboration with a development partner doesn’t entail a lot of operating costs associated with managing internal staff. As the team is already formed, most of them have all the software and hardware needed for work, enabling them to get down to development as soon as possible. 


As mentioned earlier, SDaaS allows businesses to keep their finances under control and plan their budgets more effectively. You get a clear roadmap with development results after each completed development lifecycle and only pay for the work done. For clients’ convenience, dedicated SDaaS teams often use a to-do list, breaking down the development of a software product into small tasks. This approach allows you to see the full picture of the process and plan accurate estimates for each stage of the project.  

However, note that this business model isn’t the same as the fixed priced model where you pay for development regardless of the actual time and effort expended by the team. The main pitfall of the fixed priced model is that it doesn’t eliminate the risk of discrepancies between expectations and outcomes, often leading to disputes over scope changes and additional requirements. 

In contrast, the SDaaS partnership model offers greater flexibility and transparency, as you only pay for the work completed based on the agreed-upon milestones and deliverables. This makes it easier to pivot if you need to adjust the scope, change priorities, or increase/decrease deadlines.  

Find a more detailed breakdown of the differences between the SDaaS and fixed priced collaboration model below.

FeatureSDaaSFixed price model
PricingSubscription-based model; pay for services on a recurring basis.Fixed price agreed upon upfront for the entire project.
Cost structurePredictable monthly payments based on agreed-upon subscription plans.Lump-sum payment at the beginning or at specific project milestones.
FlexibilityFlexible resource allocation and scalability based on project needs.Limited flexibility once the project scope and budget are defined.
Resource managementSDaaS provider manages the development team and resources.Client manages the project resources and team internally or through outsourcing.
Scope changesCan accommodate changes in project scope with adjustments to subscription plans.May require change orders and additional negotiations for any scope changes.
Risk managementShared responsibility between client and SDaaS provider, with a focus on collaboration and communication.Client bears the risk of project delivery and may face additional costs for scope changes or delays.
Time-to-marketGenerally faster time-to-market due to the availability of dedicated resources and agile development processes.Time-to-market may be longer due to the fixed scope and potentially longer negotiation processes.

Access to diverse tech expertise

Another benefit of the software as a service development model is that it allows you to bring the right technical skills to your team at any given time. This can be handy, for example, if your in-house team is busy with other projects or you simply don’t have people competent in the technologies you need. 

By turning to the right software dedicated development team, the issue of the technology gap can be easily addressed. SDaaS providers typically have a vast pool of talent knowledgeable in different tech stacks and trends, allowing them to tackle a variety of software development projects and match different business goals. 

This benefit is especially important for companies operating in fast-moving industries or those looking to adopt emerging technologies such as blockchain, AR, VR, AI, and machine learning. SDaaS providers are well-equipped to meet these demands while ensuring that the specialists you need get engaged in the project at the right time. 

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We don’t need to tell you how high turnover in the IT industry is. You can spend months recruiting developers, but there’s no guarantee that when you actually hire them, they won’t leave within the next few months of being hired. This problem is well familiar to large software development companies, not to mention smaller organizations and startups who virtually have to hunt for skills to scale up and innovate. 

An SDaaS service addresses this particular issue. The dedicated development team is reliable and fully committed to your project from start to finish. You won’t have to worry about them leaving because your competitor offered them a higher pay, or that they may burn out and drop out of the process early on. If anything like this happens, a SDaaS provider will immediately replace a specialist with another one, ensuring that the development process continues without undue delay.  

QA included

One of the biggest advantages of using software development services is that they include QA control, eliminating the need for any other hires. This means that as a product goes through the software development lifecycle, it undergoes regular checkups at every stage to ensure that it comes out bug-free and in line with your expectations. Having software engineers on the team is a competitive advantage of SDaaS providers and is exactly what gives them an upper hand compared to freelance developers, for example. 

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Fast Time-to-Market

Finally, with an SDaaS team working on your project, you can significantly expedite the time required to launch a ready product. First, you don’t need to hire or onboard staff – the team is already formed and can start working on a project virtually within days after signing a contract. Secondly, the process of development is transparent. As you’re paying for the service on a monthly basis, you can keep track of what’s happening at each stage, allowing you to make accurate time estimates and speed up product launches. For example, if you notice that some of the features are slowing down the product release, you can focus on the most important ones and plan the rest for the next iterations. 

How Is IT Outsourcing Different From Software as a Service Development?

If you’ve read this far, you might find yourself wondering if there are any differences between the SDaaS model and IT outsourcing, because these two practices may seem rather similar at first glance. However, this isn’t quite the case. 

SDaaS, unlike IT outsourcing, is specifically focused on development, deployment, and maintenance of software applications, whereas IT outsourcing can encompass a variety of IT-related functions, including but not limited to infrastructure management, technical support, and business process outsourcing. 

Besides that, there are a number of other characteristics unique to SDaaS. We’ve highlighted them in the comparison chart below:

AspectSDaaSIT Outsourcing
Scope of servicePrimarily software development, deployment, and maintenance.Broader range of IT services, including software development, infrastructure management, technical support, and business process outsourcing.
FocusSoftware development tasks: coding, testing, deployment.Diverse IT functions depending on the outsourcing agreement.
Client involvementTypically more direct involvement from the client in defining requirements and guiding the project.Can involve less direct oversight from the client, with tasks delegated to the provider.
ControlThe client often has more control over the development process.The level of control varies depending on the outsourcing agreement, but typically it offers less direct control compared to SDaaS.
PricingSubscription-based or pay-per-use models, often tailored to specific services or resources consumed.Pricing structures vary, including fixed-price contracts, time and materials contracts, or other arrangements based on the scope of services.
FlexibilityOffers flexibility in scaling resources up or down based on project needs.Flexibility varies depending on the outsourcing agreement, but may offer scalability options for certain services.
Typical use casesStartups or businesses needing rapid software development without extensive in-house resources.Enterprises seeking to outsource specific IT functions to reduce development costs or access specialized expertise.
Risk ManagementThe client may have more visibility and control over potential risks associated with software development.Risks may be shared with the outsourcing provider, with mitigation strategies outlined in the agreement.

As you can see from this chart, software as a service development model and IT outsourcing aren’t the same thing, although they do have common features. Outsourcing is, so to speak, a more general approach: any IT-related service can be outsourced on terms agreed upon with the outsourced vendor, while software development as a service is primarily focused on development. 

Furthermore, outsourcing software development implies less commitment compared to SDaaS. Most often, companies either delegate a project to a third-party vendor on an ad hoc basis or rely on outsourced vendors to implement only some parts of the project, like MVP development, design, or testing, to unburden their internal staff. In contrast, SDaaS involves long-term relationships. As a rule, developers are hired not only to develop the product but also to monitor its performance after launch, providing ongoing maintenance. 

On top of that, companies can more easily scale their development efforts using SDaaS. Unlike outsourcing, where you may have a fairly rigid agreement with the vendor, this model allows you to scale your development resources up and down based on the current needs. More importantly, you can predict your costs, which distinguishes SDaaS from the Time and Material business model, where costs can vary significantly based on resource usage. 

Signs You Need Software Development as a Service

Now that we’ve looked at the benefits of SDaaS and the key distinctions between this model and IT outsourcing, it’s time to investigate the reasons behind considering SDaaS for your organization. Here are some signs that indicate you may benefit from SDaaS.

Lack of resources

One of the first signs that you need SDaaS is that you don’t have the necessary expertise or resources to handle software development projects internally. This problem is common among startups, which are often limited in financial and human resources, though even larger organizations that plan a complex software solution may find it difficult to find the IT talent they need. If you don’t have IT specialists who can bring your project to life, turning to SDaaS can be the best way out. 

Need for rapid development

If you feel like your competitors are always ahead of you only because you’re too slow at delivering new software solutions, this is a sign you might need SDaaS. With a team of professionals dedicated entirely to your project, you can significantly speed up your development timeline and get ahead of the curve. 

Desire for cost optimization

The cost of product development is not cheap. Even a simple app can cost you thousands of dollars, not to mention custom software development, where the cost of digital products can easily run up to $150,000 or more. Add to this cost fluctuations that often happen during the development process due to changes in requirements, and you could end up with a bill that is several times the budget you originally allocated to the project.

SDaaS helps prevent this issue. Since you negotiate all the costs from the beginning when you first discuss your subscription plan, there’s no risk of any unexpected costs being carried over into development later. The only time your costs may change is if you decide to upgrade your subscription plan. This means you have greater control over your budget and can forecast your spending throughout the project’s lifecycle more accurately. 

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Software development isn’t your core competency

If software development isn’t what your organization is doing, it would be better to focus your resources and energy on what you do best and leave the development work to a dedicated software development team rather than deviate from the core business functions. Not only will this save you lots of time, energy, and money, but it will also give you peace of mind that your software project is in the reliable hands of professionals and will be delivered on time. 

Complex project requirements

If you’re planning to build a sophisticated AI-powered application or integrate multiple systems into a complex enterprise, but you don’t have specialized skills or technologies on your team, you may want to hire a software development partner. The main strength of SDaaS providers is that they have access to a diverse talent pool with expertise in various programming languages, frameworks, and tools. This means they’ll have no problem assembling a team with the right skills to tackle your project effectively. 

How to Choose a Software Development Partner

If you’ve never worked with an SDaaS software provider before, you might feel a bit overwhelmed by the prospect of choosing the right partner for your business. There are so many service companies out there, and they all claim to be experts in the field. But how do you know if they are actually reliable and can do the work you need? Below, we share a few tips and recommendations that will help you sift through the many options available and choose the right one for you. 

Make a list of requirements

First of all, you need to make a list of requirements for the product you want to build. You may know very well what you want to create, but if the requirements aren’t in writing, it can be rather difficult to explain it to the development team, even if you’re talking to senior engineers. A software development team needs to have a clear understanding of the kind of product you want to build. 

So, start by answering questions about what features you want your product to have and what problems it will solve. Break the product development into details – this will allow you to see if you need any integrations that you might not have thought about at the beginning. If you want any specific design cues, you should specify your preferences. Additionally, the requirements for software development should include such information as the target audience, scalability requ