How to Create a SaaS Product? A Step-by-Step Guide to SaaS Product Development

SaaS (Software-as-a-Service), also known as cloud software, has become a very popular software delivery model due to its convenience. Access to business applications through a web browser, without painful installations and rigid contracts, is a blessing for many. Businesses can pay for services over time rather than all at once. This makes SaaS applications more flexible and affordable for any budget.

SaaS can be applied in any industry for any operations, such as e-commerce stores, enterprise solutions, customer relationship management, healthcare, project management, or human resources solutions. These factors make software as a service an excellent solution for the provider company and users. This guide will show you how to create a SaaS product.

What is a SaaS Product?

Software as a service is a new sales model that has long replaced traditional software licenses.

A SaaS product is online software that all users can access.

Examples include the most popular SaaS companies — Dropbox and Google Apps. To use SaaS platforms, users do not need to install anything on their devices because the application is hosted on a provided server. Any updates and further maintenance are handled on the host side and are invisible to the user. The product is not sold with a perpetual license but is distributed via a subscription model.

Advantages of SaaS

The biggest and most obvious advantage of SaaS solutions is the lack of need for specialized hardware. Additionally, cloud web applications provide:

security — your data is stored in a reliable place
scalability — you can easily upgrade or modernize when needed
reliability — servers can be located worldwide, so if one fails, the others continue working
regular revenue for developers
cost reduction — SaaS reduces development costs because there is no need to purchase and maintain expensive hardware
potentially larger customer base due to lower costs and trial periods
availability — the solution is accessible at any time, limited only by internet connectivity

Types of SaaS Applications

There are many options for cloud applications. Among them, the most popular include:

e-commerce software that helps run an online business, including product management and payment integration, such as BigCommerce or Shopify
vertical SaaS
- products focused on a specific niche that optimize business processes
collaboration software that aids communication and information sharing, such as Miro
CRM (customer relationship management software) aimed at automating sales and marketing processes, such as HubSpot
ERP (enterprise resource planning software) for managing business processes, such as Oracle
project management software that helps managers interact with their teams, such as Jira or Workflow
billing software that enables all payment procedures with a single click, such as Tipalti

SaaS Application Development Team Composition

Developing cloud SaaS software requires specific roles. Here is what the SaaS development team will look like.

Project Manager

Their responsibilities include planning the software development process, setting tasks for team members, and monitoring their completion. The product manager ensures that work is carried out according to established deadlines and requirements.

Business Analyst

This specialist is responsible for analyzing the software's market position and documenting its development, as well as evaluating and building a viable business model for the client/company.

UI/UX Designer

One of the key positions is the UI/UX designer, who designs and implements the application's interface and user experience.

Backend Developer

The person responsible for managing all server-side tasks of the SaaS application is the backend developer. They ensure the application functions as planned using scripting languages.

Frontend Developer

This role works on the client side, converting designs into code using JavaScript or any other language to create frameworks.

Quality Assurance Manager

This position involves testing the SaaS software for defects, bugs, and issues, and reporting them to the team for resolution.

The number of team members may vary depending on the project's scale and development budget. You may need other specialists or technical staff. Additionally, if you lean toward the DevOps methodology for SaaS projects, you will also need a DevOps engineer. At Selleo, you can find a team of highly qualified and experienced professionals to do the job.

SaaS Product Development Process: How to Create a SaaS Application from Scratch

1. Market Analysis — Validate the Idea
The long-term success of your product depends on thorough market research that provides insight into your competitors and the demands of your potential customers. This research will help validate your idea and avoid repeating the mistakes of those who failed. You must be confident that your target customers are willing to pay for your product and that your offering meets their needs. Ensure that your business model delivers clear and recurring benefits and is attractive to a broad audience.

2. Discuss SaaS Product Requirements
SaaS solutions have some common features, so a clear plan for customization, integration options, and security is very important. In the SaaS model, it is crucial to ensure maximum security, as it is the foundation of a good solution. Consumer requirements are constantly changing, so you must be able to adapt. Additionally, the software must be built to handle an increasing number of users without slowing down.

3. Define the MVP
Having a minimum viable product means defining the core essential features that will benefit your customers at the lowest cost to you. The MVP is what early testers will try and what will evolve into the final product.

A simple way to define the minimum viable product is to answer these questions: who is your user persona, what actions do users take to solve their problems, and what solutions can you offer.

4. Choose a Pricing Model
There are various pricing models for SaaS solutions that can significantly impact your product's popularity. The pricing strategy should align with the needs of your target users.

usage-based pricing — users pay based on the amount of usage
feature-based pricing — you offer different feature sets
freemium — a free version with limited capabilities and the option to upgrade
per-active-user pricing — a fee is charged per user for the entire product
flat-rate pricing — the entire product or a set of features is offered at a single price, paid monthly or annually

Typically, SaaS products are offered with an initial low price, a free trial, or promotional pricing.

5. Technical Aspects
At this stage, you need to determine how the SaaS solution will be built. You should consult professionals to help identify which programming language, tools, and platforms are needed to create a SaaS product. It is important to keep both the long-term product and the MVP in mind.

6. Find and Build a Development Team
Now it is time to find or build a development team that will handle the entire SaaS development process. Here you have two options: either assemble a team from your in-house staff (if you have them) or fully or partially outsource development. Outsourcing a full team gives you many advantages and allows you to focus on business processes such as marketing. You can read more about outsourcing in the article 4 Reasons Why You Should Consider Outsourcing SaaS Development.

7. Determine Your Budget
After all the steps taken so far, you should have an idea of how much developing a SaaS application will cost you. Take into account the time needed to build the product and the time needed to start selling. Plan your budget carefully, keeping in mind possible changes and delays. It is better to plan for the worst-case scenario and be pleasantly surprised than the opposite.

How to Convert an Existing Application into a SaaS Model

To convert an application into a SaaS business, you need to go through 4 main stages:

Analyze. Evaluate your application's potential against existing market solutions. Examine its features and integrations. Consider whether you want to introduce a new feature model or if some features can be eliminated. Think through the conversion process as if giving your product a second life in the form of cloud SaaS.
Build a team. Transitioning to a SaaS platform means that the way you and your team support and maintain the product will change. Train your team in advance so they are prepared for these changes. You can also seek external support and outsource SaaS application development.
Choose a cloud provider. One of the key differences between SaaS application development and traditional software development is hosting. If your product will be accessible online, you need to host it in a cloud environment. Select several providers and compare them, paying special attention to the team's experience, number of users, and customer service quality.
Migration. The migration itself can take some time, so be patient. It will depend on the complexity of your product, your team's expertise, and required integrations. Engaging SaaS software development specialists will certainly shorten development time.

Also, keep in mind that in some cases, it may be necessary to migrate the project to a new technology stack or rewrite the backend/frontend, so consider this when estimating.

An example of transitioning from on-premise software to a SaaS business model is Adobe. Previously, you could buy a physical copy of Photoshop, but now it is tied to a monthly subscription plan that gives access to other Adobe products as well. The fee is much lower than the cost of a physical copy, and it allows for updates. Moreover, you can get a free trial to test Photoshop without any restrictive contracts.

Which Key SaaS Metrics Should You Track?

If you are a business owner, you obviously want to know how your business is performing. There are many metrics that can inform you about the health of your product. While using tools like Google Analytics or Hotjar is useful, they are not always sufficient.

Most SaaS companies focus on KPIs (key performance indicators) such as:

Monthly or annual recurring revenue
CAC (customer acquisition cost)
LTV (customer lifetime value), which shows the revenue a customer generates over the entire subscription period
NPS (net promoter score) — the value a customer gets from your product
Churn rate — the percentage of customers who cancel their subscription each month

When analyzing your metrics, be sure to distinguish between low-touch SaaS and high-touch SaaS. In low-touch products, the software handles subscriptions through the website, email, etc., with minimal interaction from the sales team. In high-touch products, the sales team is actively involved in processes such as lead generation, onboarding, and customer support.

Conclusion

Although building a cloud SaaS application is not suitable for every business, the model itself is becoming increasingly popular due to its advantages. Many large enterprises are transitioning to this distribution model, such as Adobe Photoshop or Microsoft Word. It is also worth noting that some widely popular applications like Spotify, Slack, or Grammarly were built as SaaS from the start.