How to Develop a SaaS Application in 2023: The Ultimate Guide

Who doesn’t want their business to flourish? Who doesn’t dream and work hard to become the next HubSpot, Slack, or Trello? They owe their success to the talent of their team and the entrepreneurial flair of their founder. They owe their existence to the users who believed in those products and fell in love with them.  

Why did they fall in love? There can be many reasons, but there’s something that unites the products mentioned above: a SaaS application.

What is SaaS, and what forms does it take? What’s the difference between PaaS and SaaS? How much does it cost to build a SaaS application? What to consider before launching it? In this article, we’ll try to cover everything worth knowing about SaaS solutions in 2023. Let’s get started.

SaaS app definition

The SaaS industry is now worth over $171.9 B with an annual growth rate of the SaaS industry of 17%. According to a report by Deloitte, 93% of CIOs have adopted or plan to adopt cloud SaaS. So, let’s explore why companies around the globe love SaaS. For that purpose, we'll start with a definition.

SaaS—which stands for Software-as-a-Service—refers to a type of service delivery in which a program (or data) can be accessed from any device that's connected to the Internet. Do you remember the days when it was necessary to install the program or service to a computer via USB or even a CD? It was called the on-premise approach. Well, thankfully SaaS software has made things easier. Today, applications can be downloaded from the Internet and installed while the user attends to other tasks. (SaaS applications are often referred to as web-based or hosted software).

The top examples of SaaS applications are Slack, Dropbox, Trello, Canva, and Google Workspace. 

Benefits of Software-as-a-Service

The SaaS delivery model quickly became popular due to the advantages it offers clients and providers.

• Flexibility and cost-effectiveness

Developers offer different subscription models, so companies can pay only for what they need.

• Scalability

SaaS software readily accommodates additional services and plug-ins. In the event of a change in the business model or requirements, the subscription plan can be upgraded with a selection of the latest features. 

• Quick setup

The deployment process speeds up dramatically in comparison with the old delivery model when the client had to purchase physical media. Today, SaaS software can be downloaded from the Internet. 

• Updates

The latest version of the SaaS product can be downloaded, and there is no need to buy an upgraded version.

• Security

Large corporations make cybersecurity a top priority because data is golden. Accordingly, their data is protected and stored on safe servers. 

Types of SaaS apps

There are two different types of SaaS solutions: horizontal SaaS and vertical SaaS. Let’s clarify the difference between them. 

A horizontal SaaS model refers to products created for a wide range of industries. These applications usually expand and develop new products to serve even more businesses. Think of Google that developed Google Meet or Microsoft with their Microsoft Teams.    

Vertical SaaS solutions, in their turn, focus on a specific niche or industry. Examples include Guidewire, a SaaS platform for the insurance industry, and the Toast software for HoReCa.

SaaS software can serve different purposes, and consequently, there are classes of SaaS apps. Let’s take a closer look.

• SaaS apps for project management 

If you’re reading this, you’re probably familiar with Jira or Trello. Those are the examples of cloud-based PM apps without which it’s nearly impossible to imagine remote work. 

• ERP

In a nutshell, ERP (Enterprise Resource Planning) apps help companies manage their resources more effectively. Most businesses prefer cloud-based solutions because they're secure, scalable. and flexible. While many ready-to-made options are available on the market, tailor-made software addresses your challenges in the most effective manner. In this article, we’ve got all the questions answered about types of ERP solutions, possible benefits. and technical stack. 

• CRM

Customer relationship management tools help businesses maintain good relationships with their clients, update customer databases, track orders, manage marketing campaigns and analyze sales. Can be a part of the ERP app as well. The most popular CRM apps are Salesforce, Oracle, and HubSpot. 

• E-commerce

In the era of click-and-mortar stores—in 2021, over 2 billion people worldwide bought goods and services online—having a website is essential for retailers. And e-commerce apps like Shopify help build, update and manage the infrastructure. 

• Billing 

Billing SaaS apps such as Tipalti remove the need to manually control invoicing, tracking payment data, and receiving recurring payments, which frees up staff’s time for more strategically important tasks.

Other well-known SaaS businesses are Netflix, Calendly, Grammarly, and Microsoft 365.

• Communication

The pandemic marked a shift to online communication, so now there’s probably no people who haven't heard of Zoom, Google Hangouts or Skype. Communication SaaS products provide users with an easy and stress-free platform to hold online meetings and talk to no matter who from any place with an Internet connection.

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Difference between software as a product (SaaP) and software as a service (SaaS)

You may wonder, what is the core difference between traditional software and SaaS apps? The difference is in how clients pay for them and how they get them. With a Software as a Product (SaaP), customers pay once and don’t have the software updated. To enjoy upgrades and new features, they need to purchase them although it is usually less than the cost of the original purchase. What’s more, one payment is for one device. In contrast, SaaS apps are distributed through subscriptions, users get updates as long as they pay for the subscription, and those apps are available on multiple devices.

Simply put, it’s like we don’t buy CDs to listen to music anymore, but pay for an Apple Music subscription every month instead.

Here’s a comparison table to highlight the key differences between SaaP and SaaS.

Notable statistics

It's easy to see that SaaS apps have advantages over the traditional delivery model. Let's talk about how businesses around the world use SaaS to gain an edge. 

1. The number of SaaS apps organizations use is rising: in 2017, there were approximately 16 SaaS apps per corporation. In 2021, there were approximately 110 SaaS apps in use per corporation. 

2. Statista predicts the total size of the cloud Software as a Service worldwide market to reach $166.8 B by 2024.

3. Compound Annual Growth Rate (CAGR is the metric that is most commonly used by investors to indicate the potential of a business or industry.) is 16.3% currently (Cloud Computing Market by Service, Deployment Model, Organization Size, Vertical And Region - Global Forecast to 2026)

4. The 2020 Global Technology Leadership Study conducted by Deloitte states that 70% of CIOs are attracted to cloud-based SaaS for its agility and scalability; 38% of companies adopt cloud-based systems to enhance disaster recovery; 37% of companies value flexibility.

5. The 2022 State of IT report says that 12% of a business’s SaaS budget is for operating systems; 10% of a business’s SaaS budget is for security software, and 10% of a business’s SaaS budget is for productivity.

6. We can hardly name an industry that hasn't been affected by COVID-19. It also changed the way we work, which resulted in a boom of remote working. And this is nearly impossible without collaboration and communication apps, such as Atlassian, Jira, Trello, or Slack.

7. Blissfully reports that IT Security, Customer support, and HR departments are more reliant on SaaS than other ones.

Source: Statista

6 must-have features of a successful SaaS app

Flexibility, security, and easy maintenance are no longer a luxury, but a necessity for SaaS applications. Below is a list and descriptions of must-have features for this type of product.

• Scalability. The product you’re building must be able to scale vertically as well as horizontally and adapt to your clients’ growing business needs.

• Flexibility. This means the possibility to add new features to the product rapidly to meet new requirements.

• Data security. SaaS applications deal with huge amounts of sensitive data and have to be ready to invest resources in data security. Data is the new gold and is one of the most valuable business’ assets. You, as a software provider, must ensure it’s going to be safe and secure. There is one pitfall in cloud-based SaaS applications which is their vulnerability. Usually, the data is sent to a third-party service and that is where the data breach could happen. Happily, SaaS developers are now integrating strict security protocols to prevent that. What does it all mean? One simple idea: The days when data security wasn’t an absolute must-have for a SaaS application are long gone.

• Customization. The SaaS application that you deliver must give subscribers the possibility to configure various options and adapt them to specific needs. That’s super convenient for users because they only pay for features they actually need.

• Documentation. Make sure to provide your users with comprehensive and simple guides, tutorials, and manuals.

• Easy integration. It means that your software must be easy to integrate with third-party plugins and tools and ensure smooth interaction.

Looks like these features are common to many IT products not only to SaaS apps today. 

Tech Stack

Building and maintaining SaaS apps require keeping up with innovations–to ensure the quality and usability of your product. In this section, we’ll talk about the tech stack for your future SaaS product. All recommendations are based on our experience. 

• Python as the main programming language

Python is on top of the list of the most popular programming languages in the world for many reasons. It (1) is compatible with Artificial Intelligence (AI), Machine Learning (ML), Data Science, and the Internet of Things (IoT); (2) is easily integrated with other programming languages; and (3) has extensive frameworks and libraries. It’s also flexible and readable.

• JavaScript as the main language for frontend

The front end refers to everything users can see on their screens. JavaScript, HTML, CSS work very well, and, together with frameworks and libraries, are used by teams around the globe.

• MongoDB for database

Given the fact that Americans (who constitute the main market for SaaS products, according to research) value data security and privacy so much, and even view it as a human right, it’s beyond question that your app should be safe and secure.

MongoDB is a cloud-hosted database service that's popular among developers. They love it for its flexibility, a common query interface, and, more importantly, the degree of security it provides. 

• Google Cloud or Amazon Web Services for cloud computing

Cloud computing is perhaps the backbone of SaaS products. Both platforms offer extensive benefits, but which is right for you will ultimately depend on your company’s own unique requirements. 

• RabbitMQ as a queuing system

This system allows the app to receive and react to messages from third-party integrated tools, APIs, and servers. We recommend using it because the system is secure, scalable, free to install, and compatible with other programming languages and operating systems. 

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SaaS software development: How to create a SaaS application step by step

Once you prioritized features and now have an idea of the tech stack for your future product, you need a roadmap with important milestones. Here we go:

1. Find the idea

Find the “pain” and then come up with an idea of a “painkiller.” “Pain” is a metaphoric definition of a need that your potential clients may have, and “painkiller” is for solving it. Consider Airbnb as an example: Finding a nice, safe home for a stay was a need, and Airbnb as a service became a solution. The results were impressive, with $2.2 B generated in revenue in 2021 on the basis of 150 million users and 5,000 employees globally. Think of other services you often use (like Uber, Reddit, or Slack) and ask yourself why. This will help you perceive the problems this system addresses.

Think of a task or routine you perform and ask yourself what aspect of it could be improved. In business parlance, it's called a pain point.

Remember, people pay for a subscription only if they know it’s worthwhile. Proceed to the next step to understand if they’re ready to pay for your prospective service. 

2. Validate the idea

In 2023, it’s nearly impossible to imagine “a million-dollar idea” that is not developed by teams around the globe. (Hint: If it is not, probably, this is not “a million-dollar idea.”) However, existing solutions might not be good enough and your service can become a better version of them. To understand if your idea is worth working on, try cheap and simple ways to validate it: (1) ask your friends and family, (2) come up with a question on Facebook or Reddit, (3) do market research and define who your competitors are–this can be done with Google.  

3. Choose technology stack

Well, a lot of decisions to make at this stage. Which type of hosting is the cheapest? Which one scales the best? What programming languages to choose? The list of questions goes on, and here we’ll try to get all of them answered. Disclaimer: We cannot provide you with instructions but perhaps you’ll be much better equipped and be able to make reasonable and informed decisions. 

As we’ve seen, many types of products can become SaaS apps, but in most cases, tech solutions will be essential. 

4. Hire a team

A team of experts will work on your project. The team will specify the project's requirements, transform ideas into code, validate, test, and deliver. In short, they'll strive to make magic happen. While everything depends on your budget, the SaaS development team must include: 

• Business analyst: To study the market, find the pain points, and generate ideas that will become popular painkillers 

• Back-end developer

• Front-end developer

• UX/UI designer: To turn the code into an interface that's convenient, efficient, and enjoyable

• QA engineer

• Project manager: To orchestrate and deliver in a timely manner 

The fate of the project is dependent on the team. We at Yellow have developed numerous projects for Fortune 500 companies and startups alike, and we have an extensive record of success. We’ll be happy to make something that will distinguish your company from the rest of your business segment. So, if you have an idea, get in touch. We'll gladly discuss it with you. 

5. Build an MVP

An MVP plays a huge role in all types of software creation, from building a brand-new complex SaaS solution to dating mobile app development. The creation of an MVP—a minimum viable product—can help you gauge audience interest and get feedback. In the process, you'll acquire an audience of early adopters, and from there you can define the subsequent steps in development.

We’ll always be the advocates of MVP building because we’re always interested in our clients’ success. MVP building is the only way to be flexible while developing a SaaS application. It allows you to start small, release the very essence of the product, collect feedback from early users, and then scale your app in accordance with market needs. Or even stop developing the app and abandon the idea, which is also a great result! In both cases, you’ll save time, effort, and money.

6. Test

Even bug-free code needs testing. The purpose of testing, as always, is to spot errors and imperfections. Anything that impedes performance and limits competitive viability must be called out and corrected. Testing helps SaaS developers reduce development costs at later stages and improve performance. Once bugs are fixed, your SaaS platform is fully ready to serve customers. 

7. Post-launch maintenance

The feedback has been collected and the bugs have been fixed. Now the team can add features and run the marketing campaign. Actually, this is only the beginning of the SaaS application development process. You’ll add new features, test your product hypothesis, and constantly look at what your competitors do. And it’s better to have an experienced software development team around.

How much does it cost to build a SaaS platform?

The cost of SaaS app development ultimately depends on its complexity, feature set, and the location of the development team. Still, we can make simple calculations based on the average number of man-hours required and the corresponding rates. 

So, you've conducted market research and validated your idea. Now you're eager to create a new app for communication within the company. Basically, you need backend and frontend on two systems: UX and UI design. On average, you’ll spend the following:

• 100 hours on UX/UI design 

• 800 hours on the back end 

• 1700 hours on iOS and Android development 

We don’t take QA into consideration here. The development phase remains the focus. 

Based on the hourly rates charged by specialists in the USA, Eastern Europe, Western Europe, Australia, and Asia (data provided by Upwork), we can average them as follows:

• USD 140,000 for Eastern Europe

• USD 270,000 for the USA

• USD 245,000 for Western Europe 

• USD 275,000 for Australia 

• USD 170,000 for Asia 

The above figures are estimates. The final cost of SaaS application development will vary according to your project’s requirements. 

Strategies for SaaS app monetization

Below is a list and brief description of different monetization strategies adopted by various SaaS products. 

• Freemium

The most common subscription model is when the user gets a basic version of the product for free and then purchases additional features and elements. This is the method used by Trello, Spotify, and Dropbox. 

• Feature-based pricing

This is when the user pays for a certain set of features (packages may include Standard, Premium, and Pro sets). This is the strategy employed by PandaDoc. 

• Usage-based pricing

The question of how much a user pays depends on how much they get from the product, such as in the maximum number of API requests or the amount of data stored on Amazon Web Services.

• User-based pricing

The bigger your team is, the more you'll pay for the product. That’s the strategy used by Canva. 

• Flare rate pricing 

Users pay for full access to the product for a certain period of time (month, year, etc.). 

To determine which model suits your needs, you should conduct user surveys and competitive research beforehand. Thus, you'll have a picture of the market's overall status. 

Software-as-a-Service app development trends for 2023

Market statistics indicate that the latest SaaS technologies can help you develop an effective app: 

1. Artificial Intelligence 

AI is a hot topic, and you’ve probably seen many discussions in the media or on online blogs. 

Businesses love AI because it automates routine work and facilitates communication. Social media, education, travel, and healthcare stand to benefit from AI deployment.

2. Mobile-first development

What’s the first thing we're likely to do in the morning, even before we say “good morning” to our loved ones? We'll check our smartphones for email and other updates. So, mobile-first development has become a requirement in web development, and certainly, it will be that way for SaaS app development too. WARC estimates that approximately 72.6% of the world’s population will browse the Internet through their mobile devices. 

3. Even enhanced security

The bar for Cyber Security is getting higher since more and more people start taking it very seriously. A majority of Americans (64%) have personally experienced a major data breach, and definitely don’t want to experience it again. This turns into increased requirements for security.

4. Micro SaaS 

These usually take form of browser extensions and are often run by indie teams or even a single person. The result? Small and flexible products appear to solve very specific problems and focus on a particular need, like Mealime (a meal-planning app), or Complice (a planning app).

Conclusion

In this article, we’ve covered nearly all aspects of SaaS app development, from the definition of SaaS to tech stack and development costs in different regions of the world. Why? To give you an overall idea if you need to invest your money, time, and expertise in SaaS app development. Is it easy? We wouldn't say so. Is it worth doing? It definitely is, as is clear by the potential for market growth. With a strong team of professionals, your idea can win the hearts of users throughout the marketplace. Importantly, those users will be willing to pay for what you offer.