Building Cost-Effective SaaS application - 8 Things to Know

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Businesses globally are switching to Software as a Service (SaaS) solutions, with flexibility and affordability as the drivers of the migration. Innovative giants and pioneers like Adobe, Salesforce, Zoom, Slack, and Atlassian have provided examples to guide other software companies to the promised land. 

Newcomers can follow these examples to leverage SaaS benefits, including shorter time-to-market and enhanced flexibility. The SaaS end-user spending worldwide expanded from $102.1 billion in 2019 to $152.18 billion in 2021. The market is expected to reach $208.1 billion by 2023. 

SaaS presents a unique opportunity for businesses to optimize processes, add value, and offer end-users more benefits at a minimal price. Like any disruptive solution, first SaaS adopters can increase their competitive advantage and dominate their sectors for years to come. Now is the best time for your business to adopt SaaS solutions.

What is the Software as a Service solution?

SaaS is a cloud-based software solution that can be purchased on a subscription or pay-per-use basis to use an application. At its core, SaaS is a delivery model that allows providers to license centrally hosted software solutions to customers via a subscription plan. SaaS as a business delivers a predictable revenue stream from subscription fees. 

What distinguishes a SaaS platform from a regular software application? 

Software applications are built differently. SAAS platforms require a multi-tenant architecture which means that all users share the same application instance and database. Software apps have a single-tenant architecture where each user has its own server hardware, operating system, and database management systems (DBMS). 

Advantages of the SaaS solution for the end-user:

Instant access: SaaS solutions run in a cloud environment, ensuring applications are available to customers right after the purchase. Users can access SaaS applications anywhere, anytime, and on multiple devices as soon as a subscription is confirmed.

Flexible payments: SaaS solutions provide flexible payment models, ideal for all organizations regardless of financial capabilities and tech expertise. Businesses can adopt SaaS solutions quickly and easily handpick the features their company needs with the possibility to extend the number of them later. The price of the feature packages is also often adjusted to the size of the company which is acquiring them. It is also easy to discontinue the subscription or quit the service. 

Lower software expenses: SaaS doesn’t require the customer to develop, manage, or invest in a product or infrastructure. The SaaS provider also hosts the hardware, servers, and code necessary for the app to function as well as hosts your data. It eliminates time-consuming and costly processes, reducing software expenses for organizations. It also gives users the freedom of switching the provider when the solution or price doesn’t match their needs anymore.

Minimal customization costs: SaaS applications provide ready-to-use custom options, allowing users to customize their solutions to some extent without buying or reinstalling new packages. Most SaaS providers make it possible for customers to set up their dashboards and reports, import or access specific data, as well as integrate many other apps they already use via integration plugins.

Cross-platform option: SaaS is a hassle-free approach that allows users to access the product via a web browser on almost any device. This possibility increases productivity and efficiency of work because all services or information are available even via a mobile phone, which we usually have at hand.

Advantages of the SaaS solution for business:

Scalability: Cloud-based SaaS scales on-demand, allowing businesses to expand with ease. SaaS is scalable enough to meet your company’s current and future needs. As a SaaS provider, you can upgrade your product to accommodate more users quickly than traditional software companies. This inherent scalability is the main benefit of using and providing cloud-based SaaS applications. 

Recurring revenue: According to statistical estimates, companies that generate recurring revenue are worth 16 times more than those with a one-time revenue model. SaaS solution providers benefit from a regular revenue stream, enhancing stability and long-term success. Note that the SaaS business model is not restricted to subscription fees. You can build a SaaS solution and leverage upsells like affiliate programs and ads to boost your revenue. 

Shorter user acquisition time: SaaS solutions are cheaper at entry-level, enticing startups and small and midsize businesses. Potential buyers can sign up for free trials and get a view of SaaS functions before buying a subscription which helps to convince customers of the value of a given solution. It also gives providers a chance possible to test the software and the adopted payment model.

Lower implementation costs: As a provider, you can implement continuous SaaS app improvement more cost-effectively than traditional software companies. Unlike software applications, your product doesn’t need to offer a fully developed version of its features at once. After delivering the MVP to customers and earning money on early adopters you can develop the product and its features on the go depending on the market needs and available budget.

How to build a cost-effective SaaS application? 

SaaS app development requires meticulous planning and execution to deliver a robust solution that will satisfy end-users and also allow you to earn money on the SaaS solution that you offer. If you plan to build a new SaaS product, below we mention eight aspects worth being aware of or planning ahead of time.

1. Identify the core value component of your SaaS application

Start your SaaS app development with an in-depth market analysis. You need to determine two different aspects of your solution. The first aspect refers to identifying who is your customer and what problem they are trying to solve. You need to understand their context and what they need to build a solution for. Starting with Problem Statement is the most logical way to work on a future product. For this phase, you can use tools like Lean Canvas, Persona’s Profile, and Stakeholders Map.

The second aspect is technology. Start by researching tech trends and existing SaaS solutions to discover their strengths and weaknesses. Is there something their solution might be missing? Also, the earlier collected insights on users’ needs will help you describe your app’s core value component, such as an interface, AI, and database, and identify what features are essential and optional. Ideally, the core value should help your SaaS business stand out from the crowd. 

This step will help the development team understand your business needs and estimate the scope of work. If you need support with your product design, you can reach out to a software house like LeanCode - they often offer Product Design services. However, it’s necessary to gather at least some information and have a general idea of what you want to build.

2. Determine your SaaS application niche

A niche refers to denoting products, services, or interests that appeal to a small, specialized section of the population. However, the niche should not be based on demographics but on behavioral patterns and needs. That's why your SaaS application should focus on solving a problem of a specific target group. 

For example, at LeanCode, we help our client technologically rebuild their SaaS product called Prospector, dedicated to sales teams. The Prospector solution focuses on solving the problem of obtaining data to contact potential customers who meet certain criteria, such as, for example, holding a specific position in a company of a specific size and industry. As a result, they can search for leads accurate to their needs and save time and money by calling the right prospects.

Knowing your niche also helps you prioritize the essential features for your SaaS solution's success. Making a tool too general when it comes to what it offers leads to misunderstanding of the intended use of the product, which, in turn, may lower the group of interested customers. Some users may feel they don't belong because their problem is not the core of your solution. Also, keep in mind that your targeted group needs to be a source of revenue for your business. 

3. Think about the development team of your SaaS application

Building a functional SaaS app requires an experienced software development team. You have several options to choose from. One of them, which is the most efficient while building a SaaS product, is partnering with a reliable software house that gathers developers experienced in delivering such projects. For example, LeanCode has a great track record of working with non-technical business owners, and you can read our reviews on the Clutch profile.

These four questions will help you determine if such cooperation could be beneficial in your case: 

  • Have you ever built a software product? If yes, you probably know what technologies you want to use and how you would like to design your system architecture. You are also probably able to explain the scope of work technically. If not, you need to look for a solid partner who will guide you through the complexity of building the software product, so that you can focus on your SaaS business, its value, and further promotion.
  • What type of application do you need? Each software development company offers specific types of services and technologies. Some development teams specialize in web applications, mobile apps, or both. The last thing you need is a web development team working on your SaaS mobile app. Analyze each company on your shortlist based on completed projects and industries they worked for. 
  • What experts do you need? A development team with the right experts can save you time and money. Even for small products, you may need up to several people, including a UX/UI Designer, Backend Developer, Frontend and/or Mobile Developer, Project Manager/Product Owner, and Scrum Master. Gathering them separately may take a lot of time and add recruitment costs. If you want to bring the product quickly to the market, you need to hire an experienced team. You can hire your team internally overtime to take over some duties in the long run.
  • What tech stack will be necessary? A tech stack is a mix of programming languages, development tools, libraries, frameworks, and software. Each technology has its advantages and risks. Some also give more flexibility or are more stable than others. You will need to pick one for the front-end and one for the back-end side. Your development team should be specialized in the programming language you need to build your SaaS app. For example, LeanCode has a team of experts specialized in agile frameworks like .NET, React, and Flutter. 
  • Who will take care of the maintenance? Building the SaaS product is just the beginning of an adventure. You need to be aware that ever since the product is released and users start submitting their feedback, the need for further development can only grow as you need to respond to the market needs quickly. If you cooperate with the freelancers, you can find yourself in a situation where it would be impossible for them to guarantee the short reaction periods for the urgent change requests. 

You can work with freelancers, build your in-house team, take advantage of staff augmentation service, or as mentioned earlier, partner up with a software house. Your decision will depend on your technical experience, available time for the development, and the needs of the product. However, the development team is the most critical factor in building your early-stage MVP of your SaaS solution. You need to select trusted partners who will help navigate you through the technical challenges.

4. Create a SaaS product backlog

A product backlog is a list of changes to existing features or the new features, infrastructure changes, bug fixes,  or other activities that a development team may deliver in order to achieve a specific outcome. Your SaaS product backlog should highlight everything your development team will be doing. 

Here are a few tips to help you create a comprehensive SaaS product backlog:

  • Start with the requirements. Define the backlog’s scope and indicate the steps, estimated time, and frameworks needed to deliver your SaaS app. The idea is to visualize all the tasks for the development team while prioritizing the most urgent items or mission-critical features. These requirements should be high-level and detailed. 
  • Create Epics. Define features, initiatives, or specific issues in the project. Then, link them to an epic to collect the work of mutual areas and keep track of every task. Focus on high-level goals that reflect your business value to help your development team fulfill the core requirements. Ensure your epics are as detailed and precise as possible. 
  • Analyze the User flows. A user flow depicts how the user moves through your SaaS app to reach a goal, such as logging in and purchasing a subscription. Refine your user flows to reduce the steps taken to complete specific actions.  
  • Create User Stories. User stories are collections or lists of requirements that break down the scope of an epic into smaller pieces. Each story should be detailed enough for your development team to implement into your SaaS app and iterate in increments. First, insert raw user stories and feature descriptions into the backlog. Then, collaborate with the team to create new user stories and refine the features to respond to users’ needs. You can group user stories as Raw, Ready, and Done to avoid errors and omissions.

Experienced SaaS development teams create backlogs for their clients. If the backlog is wrong, then the entire development effort, which is the most expensive part of the SaaS product, can go wasted. Ensure you go through the backlog with the team before approving it. 

5. Choose payment platforms and recurring payments for your SaaS solution

Choosing the best monetization model for your SaaS app is crucial for its success. SaaS product is associated with regular, ongoing payments over a defined time period for the use of the product. You’ll have to consider the best payment platforms and recurring payment cycles to incorporate into your app’s architecture. 

First, gather the requirements of the licensing model. Second, research available SaaS payment platforms. You can also check platforms used by similar SaaS companies to create a benchmark or narrow down your list. Then, choose the best option to meet your needs. Here are the two most popular payment platforms for SaaS products:

  • Chargebee. An easy-to-use payment platform with robust security features and customizations. This solution supports 100 different currencies and payment options. This platform is mostly dedicated to recurring payments for companies that use a subscription business model.
  • Stripe. This platform for subscription services is renowned for its API-first approach that allows users to customize payment gateways. It provides pre-made UI components and supports over 135 currencies. It can efficiently handle many one-time purchases.

Offering free trials can help you attract new subscribers. But it also opens the door for free riders and increases exploitation of the database. You’ll need robust measures to avoid these risks during the trial period. 

6. Use Agile methodologies while developing a SaaS solution

After investing your resources to build a SaaS solution, the last thing you need is a similar product to beat you to the market. Use Agile methodologies to shorten time-to-market and stay ahead of the competition. 

  • Think about the MVP. Your development team should only build the necessary features in the MVP stage. The idea is to launch your SaaS application and attract paying customers as quickly as possible. It can save you time and money in the long run because the budget is never big enough to cover all the ideas.
  • Simple first version. Some features are useless for your current audience so in the first phase of your product you need to stay focused on its core. Keep in mind what problem your product is going to solve and what is necessary from the user’s perspective to achieve that. Try to limit the complexity of the first version of your SaaS solution.
  • The user feedback loop. This strategy allows your development team to implement continuous product improvement. Deliver a functional and usable SaaS application to the market and iterate over time based on users' opinions and suggestions. Over time you will discover what might be missing in your product or which part of it is unnecessary.

These Agile methodologies ensure you don’t waste time building the perfect SaaS solution right from the start. Creating the ideal product takes time and requires good market understanding. It is challenging to gather all the data and opinions before the product is launched. When a product is built according to an agile / scrum approach, it means, by definition, continuous change management and product improvement as it develops.

7. Test your SaaS solution

Product testing and product training are critical steps in building Software as a Service.

Testing is the broad term that refers to the activities of Validation and Verification. Test your SaaS solution with end-users or early adopters to gauge the app's reception. It's a critically important process because you have a chance of testing your SaaS solution with real users in real scenarios. It will help you answer the question of have you actually built a product that is helpful from the user's perspective. And also to the question of if you have built it correctly so all the features and the way it works are easy to understand? The user-acceptance testing can reveal hidden technical issues, allowing you to address them before they become problematic. 

Another important part is delivering product training. Provide usage training to help users maximize your app’s benefits. Even if the solution you offer looks attractive to users they may not know how to use its full potential or they can resign from using it if they won’t understand its core part quickly. The easiest way to learn is through a video. You can create in-app training or trial videos for users with clear instructions on using specific features and tools. This step streamlines the onboarding of first-time users and boosts customer retention. Users are willing to pay for the solution when they see its value proposition right away.

8. Plan your SaaS application system architecture

Think about scalability, integration, reliability, and security from the start. Existing complexities in any app tend to increase over time as it attracts more users. So, build a scalable SaaS application system architecture from the ground up. SaaS architecture plays a critical role in reliability and security. Vulnerabilities and crashes can increase if users surpass the app’s maximum limit. The architecture gives you a roadmap and best practices to follow when building any product so that you end up with a well-structured application.

If you’re creating a SaaS solution for business, ensure it integrates seamlessly with other enterprise apps and tools. You can incorporate APIs into your app’s architecture for third-party developers to access and program the code to integrate with other solutions. For example, the Prospector system was based on the old version of the app, so some legacy systems required integration. LeanCode redesigned Prospector’s app architecture which was a big and not easy part of the project.

Key takeaways

1. If you want to create a new software app, consider building a SaaS solution. 

2. Think about the advantages and value offered by your SaaS product vs. competitors’ solutions. 

3. Always start with defining the end-user and the specific problem you are trying to solve.

4. Prepare for SaaS app development with the right team, technology stack, and tools.

This article will help you understand what is necessary to build a functional SaaS solution. If you lack software development expertise in-house, partner with a reliable SaaS developer. You can rely on LeanCode to help you develop your SaaS application. Check out the Case Study of Prospector to learn more about the SaaS product scope of work and project background. It may give you additional insights.

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