How to Build a Cloud-Based SaaS Application in 6 Steps

May 24, 2022·14 min read

Software as a Service (SaaS) is a relatively new approach replacing traditional software license purchase. Why is it more popular among both users and service providers? How is such software created? Let's dive into SaaS app development together!

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Alex Alexieiev
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While software as a service (SaaS) was a relatively new business model a decade ago, it’s now one of the leading software trends worldwide. Suitable for a great number of industries such as retail, finance, marketing, healthcare, and travel, SaaS may be the right fit for your business.

If you want to build a SaaS application but don’t know where to start, you’ve come to the right place. In this article, we:

  • define what SaaS applications are and tell about their advantages
  • describe the process of SaaS application development step by step
  • point out important things to keep in mind when building your software as a service app
  • give a rough cost estimate for cloud-based SaaS app development.

Let’s start with the basics.

What is a SaaS application?

SaaS, or software as a service, is an alternative business model to traditional software licensing. With the SaaS approach to software delivery and maintenance, developers don’t sell their programs with a lifetime license or wait until next year’s version to release feature updates. Instead, companies market their software as a service (hence the name), typically via a subscription model.

These applications are hosted in the cloud, which means they don’t need to be physically installed on a user’s computer. The difference between SaaS and on-premises software is best illustrated with an example.

saas vs on-premises software

Let’s consider a popular product that in 2012 made the transition from the on-premises software delivery model to the SaaS model — Adobe Photoshop. If you work with visual creators, you’ve probably seen Photoshop in action. Years ago, Adobe Photoshop, along with countless other programs, was sold to consumers for a one-time price. Once the consumer paid, they were given a key to access a certain version of Photoshop indefinitely.

But if you attempt to buy the latest version of Photoshop on Adobe’s website now, you’ll quickly realize that’s no longer how Adobe offers its industry-leading product to consumers. Instead of paying a high up-front cost for a one-time product license, Adobe customers must sign up for a monthly subscription to Adobe Creative Cloud.

For example, the monthly Photography plan that includes access to Photoshop and Lightroom starts at $9.99 a month, while the last version of Photoshop available with a lifetime license started at $700.

Why is the subscription model more beneficial than buying a lifetime license? First of all, $10 a month is affordable for many different demographics, including students. Second, $700 equals almost six years of a $10 monthly subscription. Finally, a monthly subscription can be canceled at any time. Thus, if users don’t need a service anymore, they won’t feel sorry for buying a program they won’t use to the fullest.

One more significant benefit of SaaS platforms, including Adobe’s, is the ability for users to test a product’s functionality for little money.

Now let’s have a look at more benefits cloud-based applications bring to their users and owners.

Advantages of SaaS products

We’ve already mentioned one of the considerable SaaS advantages for users in the previous section. The good news is that there are more, and cloud application owners also benefit from selling software as a service.

saas advantages for users and app owners

Benefits of SaaS for users

In addition to the cost-efficiency of cloud apps, users can also take advantage of SaaS products’ accessibility, instant and regular updates, scalability, and reliability.

  • Accessibility. Cloud-based web apps are accessible after logging in from any device anywhere in the world. The only thing users need to effectively work with SaaS apps is a stable internet connection.
  • Instant and regular updates. While mobile and desktop app users still have to download new software versions to get updates, SaaS web apps have a huge advantage. Apps that run on the web are updated automatically, so users don’t even notice when and how apps are updated — they always access the latest version of the software.
  • Scalability. If their requirements increase, users can upgrade their plan in a few clicks. Downgrades are also painless.
  • Reliability. A cloud is a network of servers that can be located around the world. Even if one server goes down, the app will remain online.

Benefits of launching a SaaS app

If you’re considering building a SaaS application, you’ve probably thought about the benefits you’ll get with the SaaS business model. Let’s list them to get a full picture of what SaaS app development can bring you.

  • Ability to enter a growing market. Taking into account the benefits software as a service can provide to users, it’s no wonder the SaaS market is growing. According to BetterCloud, the SaaS market share will increase in the coming years, and 85% of business apps will be SaaS-based by 2025.
  • Ability to attract a large customer base. This is a logical continuation of the previous benefit. The more businesses want to switch to SaaS applications, the more chances you have to attract a wide audience. Moreover, cost-efficient monthly subscriptions make software affordable even for new businesses with limited budgets.
  • Regular and long-lasting revenue. The SaaS model allows SaaS developers to gain a relatively stable source of revenue in the form of subscriptions. This enables them to plan and carry out regular development efforts that keep their users happy and subscribed.

Despite all the benefits SaaS offers for business owners and platform users, it’s important to keep in mind that software as a service doesn’t work for all businesses. Let’s see what apps work best with the SaaS model.

Types of SaaS applications

While the SaaS market is growing, the SaaS business model is not a silver bullet for all industries. For example, if you offer one-time services for your customers, SaaS isn’t what you need since your users simply won’t pay a monthly fee for a one-time operation. SaaS works great for people who need to use an app on a regular basis.

It’s worth mentioning that both business-to-business (B2B) and business-to-consumer (B2C) web-based applications can effectively use the SaaS model. Let’s have a look at several examples.

types of SaaS apps

Examples of B2B SaaS applications

In the B2B sphere, the SaaS business model is widespread. Here are just a few types of apps that can successfully adopt this model.

ERP systems

Enterprise resource planning (ERP) systems are cloud-based web apps that consist of numerous modules aimed at optimizing and automating internal business processes. ERPs are complex software including inventory, accounting, HR and CRM, and many more modules. Some of the biggest names in ERP software are Oracle Cloud ERP and SAP S/4HANA Cloud.

Project management tools

You’ve probably heard about Jira and Trello — two of the most recognizable project management tools worldwide. Thanks to such cloud-based SaaS applications, companies can effectively manage everyday business processes.

Collaboration tools

During the COVID-19 pandemic, the popularity of collaboration tools rose by 322% in 2020 compared with 2019. Apps like Google Workspace, Zoom, and Slack have become a major source of effective communication for teams that haven't been able to carry out their everyday tasks offline since spring 2020.

Marketing software

Marketing is an engine that drives clients to a business and plays an important role in business development. Social media marketing (SMM) platforms and marketing analytics tools allow businesses to streamline their marketing efforts and track performance to improve their market position.

Examples of B2C SaaS applications

Not only businesses benefit from using cloud-based applications: people around the world use them daily for purposes such as leisure and education.

Streaming services

Netflix is an American streaming service that allows users worldwide to watch movies and TV shows from any device. Spotify is another popular streaming service that uses the SaaS business model. By subscribing to Spotify, users have access to songs in dozens of genres by thousands of artists all in one place, which is much cheaper and more convenient than buying each album separately.

E-learning apps

A lot of online learning apps also use the SaaS model to sell their services. For example, Duolingo offers users two plans to choose from: free and Plus. A Plus subscription offers extended functionality such as ad-free content, unlimited access to the platform, and mastery quizzes. Some online education platforms also have subscription plans. For example, Coursera offers access to the whole library for $59 a month, which is cost-efficient for avid learners who can choose any courses they want and even get internationally recognized certificates.

If you plan to build one of the types of SaaS platforms listed above or something similar, you’ll need to go through a six-step process of custom software development.

SaaS app development in six steps

SaaS software development has its peculiarities due to the cloud-based nature of SaaS apps, so it’s important to follow six steps to build a successful product: planning, a discovery phase, application design, architecture design, development and testing, and maintenance and further development.

steps to build a SaaS application

Step 1. Planning

Proper planning is the basis for building a successful application. The success of a SaaS application depends not only on using the right technologies but also on thoroughly researching the market, studying the target audience, defining the aim of your app, and thinking through the main features. This is what you should do first when planning SaaS app development.

While planning is usually a stakeholder’s responsibility, you can also ask your development partner for help. An experienced IT company will offer you business analysis (BA) services to research your case and provide you with the best solutions to enter and develop in the desired market.

Step 2. Discovery phase

A discovery phase is about structuring your plans for SaaS application development and preparing a bunch of documents that will help your development team build the app you want. During the discovery phase of a project, a BA sets up several meetings to learn the details of your project and creates documents such as:

  • Software requirements specification (SRS) — reflects requirements for your cloud application; describes the features your SaaS application should have as well as technical specifications (such as app structure and dependencies), the project objectives, user groups, the scope of work, etc.
  • Risk assessment and mitigation plan — a prediction of what risks you might face when developing your cloud-based SaaS application, along with ways to minimize those risks
  • Feature breakdown list — a table that contains all the features you want to implement in your SaaS platform along with time estimates for their implementation
  • Cost estimate — a table with a projected budget you might spend on SaaS app development

These documents are only part of the deliverables you get during the discovery phase. Moreover, at this phase, a BA helps you define the optimal development team structure to build your SaaS platform within the allocated budget and timeline.

Step 3. Application design

When it comes to web app design, you need to think about the user interface (UI) and user experience (UX). Before building a cloud-based SaaS application, it’s important to decide on the interface so it perfectly meets the needs of your target audience.

When thinking through your SaaS platform’s user interface and user experience, keep in mind what devices your target audience will use. SaaS applications work on both computers and mobile devices. A UI/UX specialist will prepare designs for devices with different resolutions so your users can work conveniently in the office, at home, or on the go.

Step 4. Architecture design

The software architecture is the foundation of a successful application that meets stakeholders’ technical requirements.

SaaS architecture is cloud-based, which means that databases, storage, and services are located in the cloud, not on physical servers. The most popular solution for building cloud-based architecture is Amazon Web Services (AWS). While there are many alternatives to AWS, Clockwise Software engineers mostly choose Amazon Web Services for our clients’ projects. There are several reasons why we prefer this cloud provider.

  • Flexibility. Using AWS, software engineers have access to 200+ services that are compatible with both Windows and Linux. Developers can choose from nearly any programming language and database.
  • Scalability. Amazon Web Services offers scalability opportunities out of the box. If app owners need to scale, they can do it in a few clicks. Downscaling is also possible thanks to the AWS pay-as-you-go business model. This means that users pay only for the services they use.
  • Security. The world’s market leader in cloud-based services, AWS offers top security for users’ data. Protected data centers and encryption opportunities make AWS the number one choice for both developers and entrepreneurs.
  • Pricing. We’ve already mentioned that AWS uses the pay-as-you-go model that allows users not to overpay when their business scales. Moreover, AWS offers free packages that give small businesses a chance to build robust cloud-based apps at a reasonable price.

Whether you choose AWS or another service for your SaaS project, a software architect should work on preparing your high-level architecture design. The design is a description of your app’s components and their connections and serves as the basis for future development.

Step 5. Development and testing

While the previous steps to building cloud applications might not seem obvious, this one is clear and doesn’t require much explanation. During this step, SaaS developers work on the front end and back end of your application. At the same time, quality assurance (QA) engineers check that each piece of functionality works properly – both in isolation and as part of one system.

It’s important to mention that in software development, especially if we’re speaking about a SaaS startup, development and testing is iterative. SaaS developers don’t build the whole application at once. They usually start with a minimum viable product (MVP) that includes only the most important features to meet the basic needs of your target audience. Once they build a SaaS platform MVP and launch it, you can gather feedback from first adopters and think about which existing features to improve and which new features to develop.

This iterative approach to development is called Agile and is widespread in software development, especially among startups.

The final part of the iterative development process is deployment. Deployment is the process of making an MVP version of a cloud-based SaaS application available to end users. During this step, a DevOps specialist or another team member with relevant experience prepares all parts of the new code to be deployed and merges the entire codebase into production.

Step 6. App maintenance and further development

Once your MVP is available to users, focus your efforts on assessing its performance. During this step, you should gather user feedback, analyze it, decide what can be improved, and determine what new functionality your users need. At the same time, SaaS developers on your team can help you fix existing bugs and plan future functionality.

You can find more details about software development steps in the article below.

Now, it’s time to discuss things you should be aware of before starting to build your SaaS application.

Things to keep in mind when developing a SaaS application

SaaS app development is a complex and long-term process that requires lots of responsibility, so you need to think through several important things before you start developing your cloud application.

Technology stack

Selecting a technology stack for your SaaS application is akin to choosing the building materials for a house. Your technology stack is what’s used to build and run your web app.

First, you’ll need several tools for developing the platform’s client-facing components. These are well known and nearly ubiquitous:

For server-side development, there are a few programming languages (and corresponding frameworks) to choose from:

  • JavaScript (Node.js)
  • PHP (Laravel)
  • Ruby (Ruby on Rails)

SaaS applications are built on the basis of cloud computing, so cloud services are essential for building this type of app. We’ve already mentioned that AWS services are a top choice for ensuring reliable performance of cloud-based applications. With more than 200 tools, scalability opportunities, and a focus on security, AWS is the best choice for building SaaS applications.

Some of the AWS technologies we apply in our projects are AWS S3, AWS KMS, and DocumentDB.

  • S3 is file storage that provides app owners with an opportunity to store large amounts of data at a reasonable cost.
  • AWS KMS is a system that helps to manage and encrypt/decrypt keys for different services.
  • DocumentDB is a fast non-relational database used to store metadata.

Tenancy model

One of the peculiarities of cloud-based SaaS applications is that the SaaS architecture can use two models: single-tenant or multi-tenant.

Tenancy in software as a service applications determines how many tenants share the same database, software instance, and computing resources. A tenant in this case is any business that uses the SaaS application.

In a multi-tenant architecture, the same database, computer resources, and app infrastructure can be shared among numerous tenants, while in a single-tenant architecture each tenant has its own. The best architecture for you will depend on your needs and requirements. A software architect together with a business analyst will help you choose the right tenancy model for your business needs.

Pricing strategy

Your platform’s pricing strategy can make or break your web app. Though there are no hard and fast pricing rules, as the SaaS business model has evolved, several proven pricing strategies have emerged.

  • The freemium model allows users to choose between free and premium features. Typically, an app’s core features cast a wide net and appeal to the widest possible audience. To bring in money with such an app, it’s necessary to convert free users to paid (or “premium”) users by offering an advanced set of features for a one-time or monthly fee. Evernote, for example, offers free note-taking and cross-device synchronization. But you can also pay to sync across additional devices and store more data in the cloud. Duolingo, which we’ve described above, also uses this pricing strategy.
  • The pay as you go model works the following way: the more features users need, the more they pay. This model works well with software companies like Amazon that charge users for the number of API requests their app sends to the server within a particular period of time. SMM platforms or accounting apps can also be monetized this way: the price will depend on the number of scheduled posts or generated invoices.
  • Tiered pricing aims to offer different packages for users depending on their needs and budget. The idea of this pricing model is similar to the previous: the more features your customers use, the more they pay. However, the revenue for you is more predictable as you provide monthly packages. HubSpot uses tiered pricing by offering three packages — starter, professional, and enterprise — targeting businesses with different needs.

What are the costs of SaaS development?

Of course, the costs of SaaS web app development vary depending on the complexity of the product, its features, chosen SaaS technologies, integrations with other services, and so on.

You also have to carefully choose the country where you hire dedicated developers. This will define the price and quality of your product. For example, if you partner with SaaS software developers from an American or Canadian agency, you’ll have to pay somewhere between $150 and $250 per hour. Companies from Asia or South America may charge $15 to $70 per hour.

Prices in Europe vary significantly. Western Europe is a more expensive outsourcing destination, with prices between $65 and $100 an hour. Developers from Eastern European countries typically charge $45 to $70 per hour. Outsourcing web app development to Ukraine, Poland, or Romania is a good deal.

A simple SaaS MVP will cost you $45,000+ to build with a company based in Eastern Europe. The price for a full-featured web app may go over $100,000 with a company from this region, which is still great compared to what it would cost to develop the same product with a company based in North America.

Conclusion

Cloud applications aren’t the solution for every business case, but the SaaS model has quickly grown in popularity due to the benefits it offers both to consumers and application developers. If you decide to build a SaaS platform, you should get ready for a six-step development journey to enter the market with a high-quality product.

Want to know how much it would cost to build a SaaS web application?

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