How to Build a Cloud-Based SaaS Application in 5 Steps

Sep 27, 2019·11 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
Business Analyst


Do you remember when buying software meant running out to the local tech store or even ordering a physical installation CD online? Technologies have changed drastically in the last 10 years. Today, the industry is dominated by a once emergent delivery and pricing model that is now here to stay: SaaS. Software as a Service is a popular (and occasionally controversial) topic in tech media today. That’s why we’ve written this article to help shed light on SaaS web applications and platforms. If you’re wondering how to build such a product or whether SaaS architecture is a good option for your project, read on.

What is a SaaS application?

What is software as a service business model? It's a delivery and maintenance approach wherein developers don't sell their programs in one-time chunks or wait to release feature updates until next year’s newer version. Instead, companies market their software as a service (hence the name), typically via a subscription model. 

These systems are hosted in a cloud, which means, they should not be physically installed on your computer to use it.

The usage of cloud computing empowers SaaS solutions with a handful of benefits:

  • Cost efficiency
    There's no need to buy and maintain expensive hardware. Besides, you only pay for the resources your app uses
  • Scalability
    Once your requirements increase, you can upgrade your plan in a few clicks. A downgrade is also possible, if needed
  • Reliability
    A cloud is a network of servers located all over the world. Even if one server goes down, your app still remains online
  • Security
    Cloud service providers pay much attention to security to ensure that your data is stored in a safe place

Cloud web apps are accessible from any device anywhere in the world. Also, the user always accesses the latest version of the program - no need to download the updates. Being cloud-based, SaaS applications have many advantages over on-premises ones. 

The difference between SaaS and on-premise software is best illustrated with an example. Let's consider a popular product that recently made the transition from traditional software delivery to a SaaS model—Adobe Photoshop. If you employ or work with visual creators, you've probably seen it in action. Years ago, Adobe Photoshop, along with countless other programs, was sold to consumers for a one-time price. Once the consumer paid this amount, they were given a key to access that version of the program, presumably for the product's support lifetime.

But if you attempt to order the CD with the latest version of Adobe Photoshop on company's site, you'll quickly realize that this is no longer how Adobe markets or delivers its industry-leading product to consumers. Today, instead of paying a higher upfront cost for a one-time product use license, users sign up for a monthly subscription to Adobe's creative suite. This monthly fee is lower than the purchase price of the old model and gives access to the most recent version of Adobe as well as instant updates. Moreover, testing the product before paying a great sum of money for it is a significant benefit.

SaaS offers a win-win scenario for both developers and customers. 

Though there has been a push back about the new subscription model, SaaS has caught on because it offers a win-win scenario for both developers and users. 

Difference between SaaS and traditional software products

Advantages of SaaS

There are a few core advantages that SaaS architecture delivers for both customers and service providers:

  • Regular and longer-lasting revenue for developers

  • Lower upfront costs for consumers

  • Developers can attract a larger potential customer base (due to these lower upfront costs)

  • Users get regular, instant updates and new features without having to repurchase new versions

  • Offering a testing period enables to check whether the service fits the need of the potential client

Through the site, customers get seamless and instant access to useful apps with all the latest upgrades and features. And, they avoid high start-up costs, whether that's a direct payment to the developer or hardware upgrade needed to run the software solution locally.

At the same time, service providers win with the SaaS model because they gain a relatively stable income source generated by monthly subscription fees. This enables them to plan and carry out regular development efforts that keep their users happy and subscribed. And, because initial costs are lower for consumers, cloud projects are also more likely to attract new customers.

But this app model isn’t perfect, and the advantages listed above don’t necessarily make it the best fit for every type of apps. Specifically, software that offers a one time or rare-use solution, or the one that caters to a niche group of consumers or professionals may lack a wide enough base of regular users.

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How to develop a SaaS solution

SaaS application development differs from the traditional approach in several ways. These differences can seem intimidating to non-experts or those not experienced with the concept. But cloud-based and traditional app development actually have a lot more in common than they have differences.

A key difference in cloud app creation is the selection of a cloud service provider. One of the central features and benefits of cloud solutions is that subscribers typically don't have to download or install software on their end devices. This is often great news for clients: they don't have to pay a high up-front price for the app itself, and they also don't have to sacrifice valuable storage or computing power to run the program or get the job done.

But the need for computational power doesn't just disappear.

Instead of running on end devices, Software as a Service providers typically do all this computing behind the scenes in the cloud and only reach out to the end-user for input and output.

That behind the scenes computation requires a reliable cloud service that can host your SaaS platform and enable convenient access for customers.

So, to build a reliable cloud app, you should select the right cloud host. Ideally, you'll want to select one with low baseline costs but also the ability to scale as your platform and user base expand. AWS (Amazon Web Services) is one common provider with a variety of tools for SaaS developers. But we recommend you do your own research after defining the specific cloud needs your platform will require.

Another tool you have to think of is a content delivery network or a CDN. It ensures, that the users can access your site or app from anywhere in the world with the best browsing speed. a CDN provides you with the network of servers, distributed all across the globe. When a customer tries to access your product, the server that is located closest responds. A content delivery network is therefore responsible for perfect user experience, no matter the location. Amazon Web Services can also help you out, just check the offered products. 

Also, follow the important trends in Software as a Service industry. You will be surprised, how many valuable ideas you will find for your business. 

5 Tips for SaaS development

Here are five more tips for you if you plan to build cloud apps.

1. What can you offer your customers?

The SaaS model requires you to offer clear and constant service to consumers. Customers are willing to sign up for incremental subscription payments, but they won’t do so for everything. So, how can you tell if the benefit you provide is the right fit for SaaS business model?

Let’s look at a real-world example of when and where SaaS doesn’t work well. Once, I was searching for a way to convert between two specific file types. Neither file type was proprietary, so I figured I would be able to find a simple online converter that would get the job done for free. But I quickly found out that many of the converters had moved to a SaaS-based model that required me to sign up for monthly payments to get my file converted.

This was frustrating. Why? Because I only needed to convert a single file, and I only used this file type about once every 6 months. There was no way I was going to sign up for recurring monthly payments for something like that, even though I probably would have been willing to pay a few dollars for one-time use.

SaaS business model is typically the best fit when your benefit is:

  • Clear and recurring

  • Of monetary benefit to the clients

  • Applicable to a wide audience

Typically, niching down a product or solution is a great exercise in clarifying the benefit and mission of a particular project. The cloud-based approach is most profitable when it appeals to a large user base,  but it also can often derive greater benefit by adding features and widening usability.

So, when deciding on a tangible benefit or service, make sure to leave room for expansion should your initial user base not reach critical mass.

Tips to build a successful SaaS product

2. Do marketing research and define your competitors

Many developers and application owners get so swept up in SaaS hype that they forget to validate their project idea by looking at one of the best sources of real-world evidence: the competition.

Have your competitors adopted a SaaS model? If not, that doesn’t mean it might not prove the best option. You just have to make sure your target customer base is willing to sign up for a subscription rather than investing upfront in a product.

If your web app functions in an arena that predominantly follows a traditional delivery model, the benefits of your product will have to exceed the benefits offered by your traditional competitors. 

Find out if consumers are tired of constantly purchasing newer versions of the software. If they are, they may be more willing to move to a subscription-based product.

Of course, market research should be a central step for any business. As you look at competitors, consider not only what they’re doing right, but also what they’re doing wrong. Look for gaps in services or features that your platform could adopt to provide added value and win over competitors’ customers.

3. Select a technology stack

Selecting a technology stack for your SaaS application is much akin to choosing the building materials of a structure or piece of physical hardware. Your chosen technology stack will be what’s used to build and run your web app. Here’s a list of the basic stack components you need to consider:

First, you’ll need several tools for developing the client-facing components of your platform. 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 on Rails

To build a SaaS product, a database for back-end data storage is inevitable. Here are the two primary relational databases:

    • MySQL

    • PostgreSQL

And finally, you’ll need to select a server for your application.

    • Nginx

    • Apache

Select technology to build a SaaS product

Each of the options above aligns best with different use cases, so it's critical that you define and predict your platform’s scalability, potential profit, and start-up costs before selection.

Need help with choosing the technology stack for your SaaS project?

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4. Choose your pricing strategy

Your platform’s pricing model can make or break your web app. Though there are no pricing rules, as SaaS has evolved, several successful pricing structures have emerged.

Chances are, your smartphone has some sort of freemium product installed. In a freemium pricing structure, apps offer a certain set of core features to everyone for free. Typically, these core features cast a wide net and appeal to the widest possible audience. The service provider then makes money by converting free users to paid (or “premium”) by offering an advanced set of features for a monthly cost.

Evernote, for example, offers free note-taking and cross-device sync for everyone for free. But, you can also decide pay for a service tier that will allow you to sync across additional devices or store more in the cloud.  

Pricing strategy for SaaS product

But you don’t necessarily have to give away a set of features for free, even though this is a great way to attract customers to a new product in a competitive environment. If your product services a more niche client base, it may be a better idea to offer certain features as loss leaders—by offering a low subscription price for core features at cost and then different tiers at higher prices that include more advanced features.

5. Find SaaS developers

A cloud application, especially in today’s rapidly changing digital ecosystem, is not a set-and-forget operation. One of the core benefits offered by SaaS platforms is constant updates, feature integration, and support.

If you or your business team aren’t prepared for or excited about long-term and regular commitment to product development and maintenance, it may be a good idea to consult with and hire an experienced SaaS developers team.

As a bonus, an outsourcing company will be able to offer industry insight and advice tailored specifically to your business needs.

Take a look at these successful SaaS startups - their stories may inspire you for some great project. 

What are the SaaS app development costs?

Of course, the costs vary depending on the complexity of the product, the features, integrations with other services, etc. In general, you will have to pay for the number of hours needed to build the functionality. 

You also have to carefully choose the country where your development team is based. This will define the price and quality of the future product. For example, if you partner an American or Canadian agency, you'll have to pay something between $150 and $180 per hour. Companies from Asia or Southern America may charge $15 to $45 per hour. But the outcome of such cooperation is under question since developers from these countries are usually less reliable. The culture gap may also affect your experience.

Europe is a cheaper alternative than the USA, but the quality is much higher than Asian companies can offer. However, the prices here also vary significantly. Western Europe is a more expensive outsourcing market with prices between $90 and $120.  Developers from Eastern European countries charge $40-75 per hour.  Outsourcing web app development to Ukraine, Poland or Belarus will be a good deal.

SaaS MVP app development cost

According to these rates, a simple SaaS MVP will cost you $15 000 to $35 000. The price for a full-feature web app may reach $100 000, which is still a great saving compared to rates in Northern America.  


Building cloud applications isn't a solution for every business case. The model itself has grown quickly in popularity due to the benefits it offers both to consumers and application developers. We hope this article has helped shed some light on the nature of Software as a Service approach, its best use cases, and a few aspects of its development process.

You or your business are considering developing a SaaS product and would like advice tailored specifically to your industry or needs? We can help!

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