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How to Create SaaS Applications?

Software as a service (SaaS) is a cloud method of delivering software apps by a vendor or a service provider to the client through the internet. It may sound confusing, but actually, it’s something that most of us deal with on a daily basis. Google Apps, Dropbox, Slack, Trello – it’s just a shortlist of SaaS products which deeply entrenched in our lives and became our daily experience. SaaS is not only handy for a common user. It’s also a prospective business model with huge profit potential. Today is a fitting moment to start SaaS-based application development and offer new SaaS products. Want to know how to build a SaaS product? In this article, we’ll get to the bottom of this issue.

SaaS – Software As A Service

how to build a saas product

SaaS is a cloud-based technology of software delivery, where applications are hosted by SaaS providers remotely, and they become accessible to customers in the form of service through the network. In plain English, it means that you don’t need to buy, install, configure and support the in-house hardware and software, you merely rent a necessary application, access it via browser, and pay not for the app itself but for the permission to use it during some certain period. The only necessary thing here is the network connection.

They are distributed either directly via the provider or by a so-called aggregator – mediator side, which gathers together SaaS products of various providers and presents them as an element of an integrated application platform. SaaS providers usually provide access to their services using a subscription model, when users (customers) make continuous payments to get permission to use an app. The pricing is flexible, and the types of payments vary depending on apps. SaaS providers may apply different options to subscription models so that customers may choose the most suitable option suited to them.

SaaS applications have become a new normal for business. It is an excellent option for small and medium businesses because it has proven to be more cost-efficient than using traditional in-house software. SaaS applications remove significant financial risks of expensive software because it requires significant time, human and budget resources, but at the same time, they present an opportunity to use effective and costly software that could have been otherwise inaccessible for small organizations. However, it’s also an option that embraces numerous spheres, and it covers various business apps, such as office, payroll, accounting, CRM, HRM, resource planning software, and the like. According to recent researches, the percentage of businesses preferring SaaS applications to on-premises deployment is growing steadily, and the total size of the public cloud SaaS market is expected to grow at a rapid pace, and it’s not expected to slow down.

saas development

The secret of success in SaaS applications is in notable advantages they provide both for businesses and general users. Below we describe the most outstanding advantages of SaaS apps that made them so well-received.

Pros Of SaaS Products For Both Business And The User

There are plenty of advantages to choosing a SaaS model, but the most notable of them are the following:

    1. Lower costs

There are several objective economic reasons why the SaaS model can provide savings for its users. Traditional software and hardware go hand in hand with heavy initial costs on its acquisition, licensing fees, installation, as well as with running costs of maintenance and upgrades. Unlike that, the purchase of a subscription to SaaS products involves both maintenance, upgrades, and customer support, and the license costs are much lower; consequently, it doesn’t require considerable upfront costs. Besides, infrastructure maintenance costs are borne by SaaS providers. This reduces expenses incurred in the maintenance of its own hardware and software. Moreover, customers are allowed to try an app temporarily before the purchase, and the subscription can be ceased at any given moment. Costs relevant to upgrades are lower than in the traditional model as well. Therefore, using a SaaS model, customers can pay only for what they have a need and what they are using.

    1. Saving time

Unlike in-house apps, SaaS applications are already installed and configured in the cloud. This diminishes the time spent on software deployment and reduces risks of something going wrong during that, such as debugging and testing its components. The maintenance duties are also handled by the SaaS provider, which decreases the time, costs, and efforts needed to improve traditional software, including software updates. Above all, SaaS products are simple in use because they already contain best practices and samples. It means that the process of introducing the new system to the employees won’t take long.

    1. Integration

Companies with running SaaS apps generally work with numerous on-premises software. Therefore, it’s often necessary to integrate them, and this is made possible by a shared set of APIs and web protocols of SaaS apps. However, the implementation of the integration mechanism will require extra human and IT resources. Likewise, SaaS products are incredibly flexible given that customers are free to change the subscription as and when required, and there’s always a place for additional configurations and improvement in accordance with clients’ requirements. And the icing on the cake is the possibility to access the SaaS app from any point of the world simply using the internet connection on various desktop or mobile devices.

Of course, like any other technology solution, a SaaS model has several downsides, and they shouldn’t be ignored. However, in spite of anything, it has a great deal to offer. SaaS model is appealing for regular customers because of its simplicity and availability in use from anywhere in the world and from any device, and because of the capacity to subscribe or unsubscribe these apps wherever necessary. From a business perspective, with proper use, it saves money, working hours, and human resources, represented by a team of high-skilled IT specialists, creating the necessary conditions for increasing productivity. Build a Software as a Service application has many prospects for further development, and given that the range of applications remains quite narrow, there’s still a chance to carve out a niche for yourself.

saas development company

How to Start a SaaS Business?

So, you came up with an idea of your product that you want to develop. But before your team starts building the application, there are some points need to be considered. Building SaaS applications requires several steps:

    1. Above all, you need to have a clear picture of the idea of your product, to choose vertical (specialize in SaaS software for specific industries) or horizontal (specialize in software categories like marketing or sales) focus to understand who your target audience is, to know whether they need your product and what will make them use it. This requires deciding the central features and components of your SaaS product. Selection of major features should proceed from the needs of the end consumer and the aims of the software, but there are several essential components of any successful SaaS application:
      1. Data security is the most crucial aspect feature of any company. It has vital importance since data is accepted as a valuable asset. Loss of it can result in financial losses, so it needs to be protected and secured.
      2. Privacy nowadays includes a number of aspects, such as user and data privacy, and their protection is a must. Hence, SaaS products acquired by companies have to guarantee that their customer privacy is secured in conformity with customer’s policy and government decrees, and it’s essential to comply with the privacy standards of each region where it is deployed.
      3. Customization, Whitelabel, and extensibility comprise the possibility that some client companies will require some specific customization to deal with some specific business matters, white labeling in order to flip it, extensibility to expand software functionality.
      4. Scalability and high efficiency of SaaS software are essential in the conditions of vast numbers of users accessing it over the network at the same time. It means that the application has to be available and scalable with excellent performance for the querying of data, transactions, etc.
      5. Companies may need software and data integration with other existing solutions and preferred platforms. It requires a set of APIs to enable integration with on-premise or SaaS products.

That was key points on creating a SaaS business, but what are the steps to building a SaaS product? Let’s move to this subject

Steps to Build a SaaS Application

Step 1: Planning

We have mentioned a few start a SaaS startup planning points in the previous paragrapher. But one more thing to decide at the planning stage is the pricing strategy for your product. The most appropriate approach here is to examine the various pricing models used by other providers, who made SaaS software. Therefore you can choose the one, which will be the most appealing to your target audience. Choose the strategy that is the most suitable for your business plan proceeding from the type of SaaS application you make. There is a number of pricing models used in this industry, for instance: freemium, flat pricing, usage-based pricing, per-user pricing, per-feature pricing, tiered pricing, and so on. Still, this list is not comprehensive and we will give every consideration to the topic of monetization of SaaS products in the further section.

Step 2: MVP

Another essential step is to build a minimum viable product (MVP). It comprises the minimum core features required to function at a very basic level. A group of early adopters will let you test the app and get helpful feedback. Moreover, this will allow you to understand if your product solves the problem for which it was created. If it solves tasks effectively, it worth enough to pay for. This way you can develop a SaaS product that solves problems better than competitors. When you create a SaaS product as an MVP, you can test different approaches and pick tools/tech stack specifically to the chosen approach.

Step 3: Development

After that, it’s time to decide on the technology stack for your SaaS application. All technologies are aimed to solve specific problems or tied up with other tools that you’d need. Therefore, at this stage, several issues should be taken into account. Before picking out a technology stack, consider if it is suitable for the features you want to implement, for MVP, if it is possible to integrate it with various platforms, how big your project, your talent pool and how mature the technology is, has it stood the test of time. This list is not exhaustive, but in the end, you need to be sure that the chosen tech stack is suitable for the task ahead of it. Do not hesitate to contact our management team! They will help you from a to z, in order to build a successful SaaS platform.

A further point is to select a development team that is crucial in order to build a prosperous SaaS product. This process often requires a range of different skills. Hence, you’ll need an experienced team good at planning, developing, supporting SaaS products.

While building your SaaS application, you should maintain constant communication with your development team to clarify any uncertainties in your requirements, test and fix the app, and to be sure that everything is proceeding as planned. You need to take into account such essential components of your SaaS product as the database you want to use, queuing systems, scalable cloud storage to host your app, content delivery networks. It is necessary to adopt agile methodologies in order to achieve maximum flexibility. And when you eventually complete building the application and complete the beta-testing phase, it’s time to deploy it.

Step 4: Production and maintenance

After the development stage, where we create a SaaS application goes delivery and deployment. It depends on several factors:

    1. Product is well testes. The development team has done a thorough QA of the final version.
    2. Product is delivered from dev servers to production servers
    3. After delivery QA team has checked production server
    4. All the following documentation is provided to the client. Including but not limited to User Manual, Technical documentation, QA report.

To build a successful SaaS business do not forget to put in motion your publicity campaign before you build the SaaS product. Use social media to advertise it and make and use the unique features of your application to create a buzz around it.

Step 5: Technical Part of The SaaS Software Development

saas software development

In order to be efficient, the SaaS application has to be multi-tenant. It means that the application has to be structured in such a way as to service multiple customers, so-called tenants. It enables more effective usage of IT resources, easy upgrades, customization, and reduces ongoing costs.

However, it occurs at different layers of the system architecture (infrastructure, database, application) and security of clients’ data is the problem to solve. According to the layers shared, the system architecture can be designed in several ways:

      1. Each tenant has a separate database and isolated infrastructure; the layers are not shared between tenants. This way entails easy coding, the lowest scalability, and the highest infrastructure/admin costs, the shortest time to market of all possible options;
      2. Each tenant has a separate database, the application layer is not shared between tenants, but the infrastructure layer is. This way entails easy coding, low scalability, high infrastructure and admin costs, short time to market;
      3. Each tenant has a separate database, application code and infrastructure are shared between tenants. This way entails difficult coding, high scalability, low infrastructure, and admin costs and a long time to market;
      4. All layers are shared between tenants. Each of them has an individual tenant id in the database, which not only identifies users but limits their access to data which they are not allowed to access. This way entails the most challenging coding, the highest scalability, the lowest infrastructure/admin costs, and the longest time to market.

The choice of the way is based on the type of the app, skills of the development team, difficulty, service level agreements (SLAs), level of security, and other aspects.

SaaS applications have to provide services on a 24-hour basis. It requires architectural amendments at the application and infrastructure layers in order to add on higher scalability and availability. There’s a need both for application and database scalability.

Application scalability can be reached through switching to another, a bigger server (so-called scaling up) or through attaching extra servers to cope with the workload (so-called scaling out). The latter option is preferable for cloud-hosted SaaS apps. In this case, the following aspects should be taken into consideration:

      1. SaaS product should be built as a stateless application. It means that client session data isn’t stored on servers but a user’s device and passed to servers when required. Such applications can effortlessly be connected to another through APIs, redeployed in case of system failure, scaled out to adjust load variations. It requires using cloud storage services such as Amazon Simple Storage Service (S3), Amazon Elastic Compute Cloud (EC2). Stateless architecture is not an obligation, but it provides the highest performance in the most cost-effective manner.
      2. Asynchronous input/output, which allows applications to carry out tasks at a different time and to interact with third parties asynchronously.

Regarding the database scalability, growth in the volume of data to be stored affects the database performance, which in turn affects the quality of user experience. In order to provide appropriate database performance, you can utilize data partitioning (dividing it into separate independent data stores), which is necessary to improve scalability and performance efficiency. There are several techniques for data partitioning, most common of them are horizontal, vertical, functional partitioning, but all of them can be combined.

SaaS apps should include open (public) API. With its help, the 3rd-party developers can get access to the software code and data, integrate it with other software, and render services to mobile apps. Open APIs stimulate rapid development and data sharing. It usually helps to reduce time to get to market, attract additional resources without additional funding, increases the functionality of a product. However, opening a code entails possible risks; therefore open APIs have to be stable, dependable, and maintained by all means. The public API architecture has to be well-considered to ensure its extensibility.

Data security is a matter of high priority since it is the aspect that discourages potential customers from using SaaS applications. It’s an essential part of the application engineering lifecycle. Thus, the security audit has to be carried out at every stage of development. There are several security practices development team may follow:

      1. The appropriate access controls should be permitted to different tenants based on their access rights through fine-grained authentication and authorization;
      2. All tenant’s data – at rest and in transition – has to be encrypted. Secure Socket Layer [SSL] and Transport Layer Security [TLS] can be used for network traffic encryption;
      3. Limit APIs data handling capacity and provide access only to the necessary data;
      4. Provide sufficient and continuing vulnerability testing;
      5. Backup sensitive enterprise data using strong encryption technologies;
      6. Carry out Governance and Regulatory Compliance [GRC] audits to examine the compliance of SaaS vendors to government and industry regulations and norms;
      7. Conduct third-party security risk assessments.

With regards to instruments necessary for building a SaaS application, it requires a wide variety of tools, frameworks, libraries, since this process is rather complex. There are numerous sets of tools in accordance with the requirements of developers, and the bulk of the languages tended to build web apps that can build a SaaS product as well. Some of the tools available for back-end development are Ruby on Rails, Node.js, Python; JavaScript, Angular.js, Bower can be utilized for front-end development; MySQL, MongoDB or PostgreSQL can be used for database administration.

Step 6: Pricing

Below you can find a rough estimation for a SaaS product. Please note without a detailed list of features the final estimations may significantly differ from the table below. The table is created with average pricing $32 per man-hour of the developer.

% time spent in the projectSaaS, from 800 hours and moreCrypto wallet, from 400 hours and more
Total hours1360680
Total price*$43 520$21 760

Our Hints In A SaaS Product Development

In our experience, in addition to the essential features of any SaaS product we can add:

      1. Simplicity. It involves a user-friendly interface that provides a clear understanding of necessary settings and enables customers to use a service within the shortest possible time easily.
      2. Rapid deployment, which is always a critical point of a development cycle.
      3. Pre-configuration options. Experience has shown, that this can be the very first challenge for a large number of new users of a product. If it offers certain services that depend on specific cases, predefined templates that assist in choosing their own configurations are necessary.

The development of a SaaS product implies an unlimited number of users. Therefore, the technology stack has to address the problem of multi-tenancy, rapid scalability of an application, speedy work with databases. SaaS applications usually “roll-out” own database, and as the number of users increases, this database expands. Consequently, the stack has to consider the continuing growth. Generally, it is web programming; it can also be GoLand, Rust, to a lesser extent – PHP and Java. However, it depends on application peculiarities.

It is a complex process, and thus, naturally, some difficulties can arise. They are mainly related to automatization of deployment, scalability, etc. Put simply, they can be solved by the use of Kubernetes or other cloud based-technologies. These problems can also be solved by means of Amazon Web Services. The main thing is to understand correctly what tasks can occur and what service will face them, how to design frameworks to predict required resources in advance. It is necessary because, apart from deployment and scaling, there must be some prediction metrics that allow managing approximate budgets needed to maintain the infrastructure, etc. Some problems can be related to the fact that infrastructure isn’t set up to handle peak workloads, and the service must cover such obstacles and adequately respond to them.

Drawing on our experience, the development of SaaS MVP normally takes at least a month, depending on the functionality. The development team includes 2-4 back-end developers, 1-2 front-end developers, DevOps specialist, 1-2 QA specialists, and a designer is required. In any case, they must be specialists able to test out the efficiency of the idea that lies behind the MVP. Any other input parameters rely on specific functionality.

It usually takes 7-12 months to develop a fully functional product of any difficulty. The final project cost is always individual and depends on the workload assessment. The payment method is based on the chosen pricing model: time and material, fixed-price, or milestone.

Monetization And Examples Of Successful SaaS Solutions

Whenever you create your SaaS application, you’ll need to choose your pricing model for the product. It is an essential decision between alternatives, and it determines the nearest future of your product and your business in general. But how to figure out precisely the pricing model, suitable for your own business? The comparison of basic pricing models to explain their core meaning, advantages, and disadvantages are listed below.

Pricing ModelDescriptionProsConsExamples
Pay-As-You-Go (Usage Based) PricingIn this pricing model, subscription costs depend directly on the usage of SaaS products: bills go up or down depending on the level of customers’ usage of it.*The price correlates with the level of utilization; *Absence of considerable initial costs causes low entry barriers.*Both revenue and customers’ costs are difficult to predict; *The value is separate from the product.Salesforce, Amazon Web Services, Chargify
FreemiumIn this pricing model, customers get a free version of service usually with basic, limited functionality. If customers need full functionality, or to remove the advertisement, they purchase a paid version.*Low entry barriers; *High competitive advantages; *The model is potentially viral; It’s possible to conduct beta testing with a lot of users.*The revenue received from paid users can be lower than infrastructure costs spent on the free version of a product;
*It’s complicated to split free and paid features in the right way; hence it’s complicated to turn free users into paid ones.
Dropbox, Spotify, Trello
Flat Rate
This pricing model is the simplest: it implies an offering of a single product or a single set of features at a single price; it’s generally billed on a monthly or yearly basis.*The offer is well-defined; *It’s suitable for small and medium scope products; *The risks for customers are low; *The required supervision of products by clients is rather little.*The vulnerability to price wars; *Inflexibility in relations with customers; *The price is hard to specify for diverse client groups with specific needs.Buffer, CartHook
Per Active User PricingIn this pricing model, clients pay only for users who use the service during a particular period.*Clients are billed only when they use the service; thus they are motivated to purchase it for the whole company;
*There are no limitations in features used by clients, this reduces the possibility of churn.
*The revenue is complicated to predict; *The model is not appealing for small or medium companies, but for large companies which are not intended to pay for subscriptions for every single employee.Slack
Per Feature PricingIn this pricing model, the fees are established based on the sets of features (tiers), which are offered to clients, e.g., Standard, Pro, and Premium set.*Clients are motivated to buy a specific extra functionality;
*It’s easier to target tiers to a different target audience.
*This model requires developing new features, and it is a costly and time-consuming processPandaDoc, Leadpages

But even so, there’s no “best and only one” pricing model for all SaaS products, the choice will depend on numerous factors, such as a type of your product, services provided, etc. Moreover, these models can be successfully mixed and matched depending on your target audience, and sometimes they can be upgraded or changed alongside the business development.

The pricing model is a basis upon which the transaction and sales processes are constructed, and which provides a regular income. However, there is every possible challenge you’ll need to face with the objective of increasing business growth. It is the time when SaaS pricing strategies are brought into play, and every single one of them is responsive to various objectives. The brief overview of the most common pricing strategies suited to the SaaS product is listed below.

Pricing StrategyBrief description
Market PenetrationIt is a strategy of setting a low price to gain recognition in a target market quickly. Prices stay low in a short/medium-turn, but the longer-term gains through up-selling and cross-selling have to compensate for the short-term losses. Market penetration is usually resorted to by latecomers in contexts where the market is saturated.
Skimming (Promotional) PricingThe essence of this strategy is to set relatively high prices for a new product at a start to increase revenues and to gradually lower prices. Early adopters purchase the product to get the first access to new technologies. Over some time the prices become lower, and the product becomes appealing to the rest of the market.
Prestige (Premium) PricingIt is used to convey a sense of meaning to the service and trade name.
Free Trial PricingProviders offer free trials (offer their product for free) in order to attract new customers, and this strategy provides various ways to turn potential users who are already familiar with the service to real customers. Free trials are usually limited by time, but they also can be limited by specific usage.
Cost-Plus (Cost-Based) PricingAccording to this approach, companies calculate all their costs, add a target percentage of markup, and set the sum as the product’s price. This strategy can be helpful to start with it, but it doesn’t consider several factors such as competitors’ prices, the product’s value, etc.
Value-Based (Value-Optimized) PricingThis approach uses value (perceived or approximate) of a product as a basis for setting a price. Thus, providers concentrate on upgrading a product and its value.

There’s also a review of several successful SaaS companies and their pricing models:

      • Salesforce provides free 7-30 days trials for their plans. They also split their plans into five groups, each of which offers a specific set of features. Due to this, their clients observe the direct correlation between value and price. Thus, they can select a plan they are interested in right now, and can easily change it in the future.
      • Evernote is one of the prominent examples of a successful freemium model. They offer a rather inexpensive and affordable premium option for common users and tier plans for businesses. By understanding clearly the connection of their product value and client needs, they created a successful service, using such a risky model as freemium.
      • Basecamp offers a 30 days free trial and $99 per month for all the services they provide without reference to the number of users or projects. Combining flat-rate pricing with free trial pricing, the company provides a clear selection process, making the decision immensely simple.
      • Mention offers 2 pricing plans, built on various customers’ specific needs: transactional and custom, in order to interest a wider number of customers.
      • Gooddata selected a value-based strategy intended to grow in conjunction with the growth of the customers and charge their clients for the number of users, use cases, and the number of analytic bundles with specific services.

To sum up, choosing a suitable pricing model and strategy is always a challenging task, it requires some time, test of several options, and hard work to stop at the model that is suitable for your service, target audience, and market.


We’ve been over the main aspects you need to know before starting the development of a SaaS application. Contemplating to build your own SaaS product? Contact us, and let’s talk.



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