How to Create a SaaS Application in 5 Steps

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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Do you remember when buying software meant running out to the local tech store or even ordering a physical installation CD online? Software solutions have changed drastically in the last 10 years. Today, the software industry is dominated by a once emergent delivery and pricing model that is now here to stay: software as a service (or SaaS). SaaS application development 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 a SaaS application or whether SaaS platform development is a good option for your project, read on

What is a SaaS application?

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

What is Software as a Service (SaaS)

To illustrate, let's consider a common software suite 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 this software in action. Years ago, Adobe Photoshop, along with countless other software packages, was sold to consumers for a one-time price. Once the consumer paid this amount, they were given a product key they could use to access that version of the software, presumably for the software product's support lifetime.

But if you attempt to install the latest version of Adobe Photoshop, 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 software suite. This monthly fee is lower than the purchase price of the old model (typically by about an order of magnitude), and gives users access to the most recent version of Adobe as well as instant updates to the software.

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

This is SaaS application. And though there has been push back from users about the new subscription model (especially during transitions to SaaS platforms by companies that used to adhere to a traditional one-time purchase 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 the SaaS model delivers for both users and software developers:

  • 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 software features without having to repurchase new software versions

Users get seamless and instant access to useful software with all the latest upgrades and features. And, they don't have to incur high start up costs, whether that's in the form of direct payment to the developer or via upgrades to the hardware needed to run the software solution locally (a benefit that's especially useful when SaaS application is paired with powerful cloud computing solutions).

At the same time, developers 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, SaaS projects are also more likely to attract new users (at least in theory).

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

How to develop a SaaS application

SaaS application development differs from traditional software development in several ways, and these differences can seem intimidating to non-experts or those not experienced with SaaS development. But SaaS development and traditional-model software development actually have a lot more in common than they have differences.

A key difference in SaaS app development (as compared to a more traditional software development model) is the selection of a cloud service provider. One of the central features and user benefits of SaaS solutions is that software subscribers typically don't have to download or install software on their end devices. This is often great news for users—not only do they not have to pay a high up-front price for the software itself, 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 user end devices, SaaS application providers typically do all this computing behind the scenes via 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 user access.

So, selecting the right cloud host for your SaaS app is crucial. 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 to enable SaaS developers, but we recommend you do your own research after defining the specific cloud needs your SaaS platform will require.

5 Tips for SaaS development

Here are five more tips we have for SaaS development.

1. What can you offer your customers?

The SaaS model requires you to offer a clear and constant software solution to consumers. History demonstrates that users 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 application?

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, lo and behold, I quickly found out that many of the converters out there had moved to a SaaS-based model that required me to sign up for monthly payments to get my file converted.

This was frustrating to me as a user. 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.

This example demonstrates the importance of understanding the benefit you're offering your customers and recognizing whether that service fits well within the SaaS model.

SaaS application is typically the best fit when your benefit is:

  • Clear and recurring

  • Of monetary benefit to the user (whether they're an individual or business)

  • 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 under development. But, because SaaS is most profitable when it appeals to a large user base, SaaS applications can often derive greater benefit by adding features and widening usability.

So, when deciding on a tangible user 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 and development plan by look 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 application functions in an arena that predominantly follows a traditional software delivery model, the benefits of your SaaS will have to exceed the benefits offered by your traditional competitors. Is your field fast moving?

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 SaaS product.

Of course, market research should be a central step for any software development project. 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 application. 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.

    • Ruby on Rails

    • Java (Spring)

    • PHP (Laravel)

Next, you’ll need to choose a database for back-end data storage. 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 its critical that you define and project your platform’s scalability, potential profit, and start-up costs before selection.

4. Choose your pricing strategy

Your SaaS platform’s pricing model can make or break your application. Though there are no real clear cut 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, a SaaS application offers a certain set of core features to all users 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” users) by offering an advanced set of features for a monthly cost.

Evernote, for example, offers free note-taking and cross-device sync for to all potential users for free. But, more advanced users can opt to pay for a service tier that will allow them 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 “freemium” features at cost and then different tiers at higher prices that include more advanced features.

5. Find SaaS developers

A SaaS application, especially in today’s rapidly changing digital ecosystem, is not a set-and-forget operation. One of the core user 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 SaaS development and maintenance, it may be a good idea to consult with and hire an experienced SaaS developer.

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

What are the SaaS app development costs?

Of course, the development costs vary depending on the complexity of the product, the features, integrations with other services, etc. But there are the costs you have to consider in any case.

Hire SaaS developers

Development and quality assurance are two main areas of cost you should consider. Depending on whether you use your internal resources or outsource SaaS app development, the costs may vary. But, expect to spend at least $10,000 for a simple software. If you have more complex features/integrations in mind, that cost might come out closer to $20,000-$25,000. However, the price also depends on the country you choose to outsource to. For example, hiring a team in North America turns out to be 2-3 times more expensive than collaborating with a team from Eastern Europe.

Other variable expenses are server and monitoring costs. Both depend on your app’s scale and the number of users. Server costs can range from $5000-$15,000, while monitoring software can range from $0 (if you go with a freemium provider and don’t have many users) up to $10,000.

Finally, once your app launches, you should also anticipate several ongoing costs. Technical support typically runs around $2000 per month, and you should budget at least $5000 per month for marketing—that’s the best way to make sure your app is put in front of its target audience (and can begin generating revenue).


Though a SaaS application doesn’t fit every software product, the SaaS model has grown quickly in popularity due to the benefits it offers both consumers and application developers. We hope this article has helped shed some light on the nature of SaaS applications, its best use cases, and a few aspects of its development process.

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