How to Build a Cloud SaaS Application in 6 Steps

If ten years ago Software as a Service (SaaS) was a relatively new business model, today it is one of the leading global trends in software. SaaS is suitable for a significant number of industries, such as retail, finance, marketing, healthcare, and travel, and could be the right fit for your business.

What is a SaaS Application?

Before answering the question “How to create a SaaS application?”, let’s briefly explain what SaaS is.

SaaS, or Software as a Service, is a business model that serves as an alternative to traditional software licensing. In the SaaS approach to delivering and maintaining software, developers do not sell their programs with a perpetual license nor wait for the next year’s version to update features. Instead, companies sell their software as a service (hence the name), typically through a subscription model.

Consider a popular product that transitioned from an on-premise software model to SaaS in 2012 – Adobe Photoshop. Many years ago, Adobe Photoshop and many other programs were sold to consumers at a one-time price. After payment, the consumer received a key for a specific version of Photoshop.

Instead of paying large upfront fees for a one-time product license, Adobe customers subscribe to a monthly subscription for Adobe Creative Cloud.

Another major advantage of SaaS platforms, including Adobe’s, is the ability to test product functionality for a small fee.

Now let’s explore other benefits of cloud applications for their users and owners.

Benefits of SaaS Solutions

If you decide to create a SaaS application, you must be sure that this service delivery model will benefit your customers. In the previous section, we already mentioned a key advantage of SaaS for users. The good news is that there are many more, and owners of cloud applications also benefit from selling software as a service.

Advantages of SaaS for Users

Beyond the cost-effectiveness of cloud applications, users can take advantage of accessibility, instant and regular updates, scalability, and reliability of SaaS products.

Accessibility. Cloud web applications are accessible after login from any device anywhere in the world. To work effectively with SaaS applications, users only need a stable internet connection.
Instant and regular updates. While users of mobile and desktop apps must download new versions for updates, SaaS web applications have a huge advantage. Applications running on the web update automatically, so users don’t even notice when and how they are updated – they always have access to the latest version of the software.
Scalability. If user requirements for the application increase, they can upgrade their plan in just a few clicks. Downgrading a plan is also painless.
Reliability. The cloud is a network of servers that can be located around the world. Even if one server fails, the application remains online.

Advantages of Launching a SaaS Application

There are many reasons not only to create SaaS products but also to use them. Let’s list them to fully understand what SaaS development can offer you.

Opportunity to enter a growing market. Given the benefits that Software as a Service can provide to users, it’s no surprise that the SaaS market is growing. According to Statista, the SaaS market size will increase from $197 billion in 2023 to $232 billion in 2024.
Ability to attract a large customer base. The number of businesses wanting to switch to SaaS applications is constantly increasing. The more companies want to use SaaS applications, the greater the chance of attracting a wide audience. Additionally, cost-effective monthly subscriptions make software accessible even to new businesses with limited budgets.
Regular and long-term revenue. The SaaS model allows SaaS developers to earn relatively stable income through subscriptions. This enables them to plan and carry out regular development to keep users satisfied and subscribed.

Despite all the advantages of SaaS for business owners and platform users, it’s important to remember that Software as a Service is not suitable for every business. Let’s look at which applications work best under the SaaS model.

Types of SaaS Applications

Although 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 to your customers, SaaS is not for you because your users won’t pay a monthly fee for past work. SaaS is great for those who need to regularly use the application.

Before figuring out how to build a cloud SaaS application, you must determine what type of product you want to develop. It’s worth noting that the SaaS model can be effectively used in both business-to-business (B2B) and business-to-consumer (B2C) web applications. Let’s look at a few examples.

Examples of SaaS Applications in B2B

In the B2B sector, the SaaS business model has become widespread. Here are just a few types of applications that can successfully use this model.

ERP systems. A cloud ERP system is a web application consisting of many modules for optimizing and automating internal business processes. Developing ERP software is a complex process involving inventory, accounting, HR, CRM modules, and many others. As of June 2023, the biggest names in ERP software are Oracle Cloud ERP and SAP S/4HANA Cloud.
Project management tools. You’ve likely heard of Jira and Trello – two of the most recognizable project management tools in the world. Thanks to such cloud applications, companies can efficiently manage daily business processes.
Collaboration tools. Globalization has made collaboration tools indispensable. Applications like Google Workspace, Zoom, and Slack have become vital for effective communication among teams that have been unable to perform daily tasks offline since spring 2020.
Marketing software. Marketing is the engine that brings customers to a company and plays a key role in business growth. Social media marketing (SMM) platforms like Brandwatch or Loomly, and marketing analytics tools like Google Analytics or HubSpot, allow companies to optimize their marketing efforts and track performance to improve their market position.

Today, many B2B SaaS applications include AI features that enhance their efficiency. For example, Tableau, a data visualization and analytics platform, offers AI-driven analytics in its CRM solution. Zendesk, a customer service and support platform, offers the Advanced AI add-on – a set of AI-based features that improve customer service quality.

How to Create a SaaS Product in Five Steps

The process of developing SaaS software has its own peculiarities due to the cloud nature of SaaS applications. So, how do you build a SaaS platform? The SaaS product lifecycle consists of five stages: discovery phase, application design, architecture design, development and testing, maintenance and further development.

Step 1. Discovery Phase

A SaaS software development project starts with thorough planning. The discovery phase involves structuring your plans for developing the SaaS application and preparing a package of documents that will help your development team build the right SaaS application for you. During the project discovery stage, a business analyst schedules several meetings to clarify project details and creates documents such as:

Software Requirements Specification (SRS) – reflects requirements for the cloud application; describes the features the SaaS application should have, as well as technical specifications (e.g., application structure and dependencies), project goals, user groups, scope of work, etc.
Risk assessment and mitigation plan – forecast of risks you may encounter when developing a cloud SaaS application, and ways to minimize them.
Feature breakdown list – a table containing all features that need to be implemented in the SaaS platform, with deadlines for their implementation.
Cost estimate – a table with the projected budget you can spend on developing the SaaS application.

These documents are only a part of what is provided during the discovery phase. Additionally, during this stage, the BA helps determine the optimal software development team structure for building the SaaS platform within the allocated budget and timeline.

Step 2. Application Design

When developing web applications, you need to consider the user interface (UI) and user experience (UX). Before developing SaaS applications, you need to decide on the interface so that it fully meets the needs of the target audience.

When choosing the UI and UX for your SaaS platform, keep in mind the 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 to ensure users are comfortable working in the office, at home, or on the go.

Step 3. Architecture Design

Software architecture is the foundation of a successful application that meets the technical requirements of stakeholders.

SaaS architecture is cloud-based, meaning databases, storage, and all infrastructure reside in the cloud rather than on physical servers. The most popular cloud solution for building SaaS architecture is Amazon Web Services (AWS). Although there are many alternatives to AWS, such as Azure, Google Cloud, or Oracle, engineers at Clockwise Software most often choose Amazon Web Services for our clients’ projects. There are several reasons we prefer this cloud provider.

Flexibility. Using AWS, software engineers get access to over 200 services. Developers can choose virtually any programming language and database.
Scalability. Amazon Web Services provides scalability capabilities out of the box. When scaling is needed, application owners can do so in a few clicks. Scaling is also enabled by AWS’s pay-as-you-go business model, meaning users pay only for the services they use.
Security. As a leader in the global cloud services market, AWS provides the highest level of data security. Secure data centers and encryption capabilities make AWS the number one choice for developers and entrepreneurs.
Pricing. We already mentioned that AWS uses a pay-as-you-go model, which prevents users from overpaying as their business grows. Moreover, AWS offers free tiers that allow small businesses to develop SaaS applications at a reasonable cost.

Regardless of what you choose for your SaaS project – AWS, DigitalOcean, Google Cloud, or Heroku – a software architect must prepare a high-level architectural design. This design describes the application’s components and their connections and serves as the foundation for further development.

Step 4. Development and Testing

While the previous stages of SaaS application development may seem less obvious, this stage is straightforward and requires little explanation. At this stage, SaaS developers work on the front-end and back-end of the application. Simultaneously, quality assurance (QA) engineers check the functionality of each feature – both individually and as part of the integrated system.

It’s important to note that in software development, especially for a SaaS startup, development and testing are iterative. SaaS developers don’t build the entire application at once. Typically, they start by creating an MVP (minimum viable product) that includes only the most necessary features to meet the primary needs of the target audience. After developing the SaaS MVP and launching it, you can collect feedback from early users and decide which existing features to improve and which new ones to create.

This iterative approach to SaaS platform development is called Agile and is widely used in software development, especially among SaaS startups.

The final part of the iterative development process is deployment. Deployment is making the cloud SaaS application available to end users. At this stage, a DevOps specialist or another team member with relevant experience prepares all parts of the new code for deployment and merges the entire codebase into production.

Step 5. Maintenance and Further Development of the Application

Once the MVP becomes available to users, you need to evaluate its performance. At this stage, you must collect user feedback, analyze it, decide what can be improved, and determine what new functionality users need. At the same time, SaaS developers on your team can help you fix existing bugs. Keeping up with the latest SaaS trends is important to stay ahead of competitors.

The stages of cloud SaaS application development are interconnected; to successfully complete the development process, you must follow each stage and perform all of them.

Now let’s look at other aspects to consider when building SaaS applications.

What to Keep in Mind When Developing SaaS Applications

Developing SaaS applications is a complex and lengthy process that requires great responsibility. Therefore, if you don’t want problems in SaaS application development to turn into trouble, you need to think through several important points before building a cloud application.

Technology Stack

Choosing a technology stack for a SaaS application is akin to choosing building materials for a house. The technology stack is what is used to develop the SaaS application.

First, you will need several tools for developing the client-side components of the platform. These are well-known and nearly ubiquitous:

HTML + CSS
JavaScript frameworks (Angular, React, Vue.js).

For server-side development, there are several programming languages (and corresponding frameworks):

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

SaaS applications are built on cloud computing, so cloud services are an integral part of building SaaS applications. We already mentioned that AWS services are the best choice for ensuring reliable operation of cloud applications. With over 200 tools, scalability capabilities, and a strong focus on security, we believe AWS is the best choice for building SaaS products.

Among the AWS technologies we use in our projects are AWS S3, AWS KMS, and DocumentDB.

S3 – a file storage service that allows application owners to store large amounts of data at a reasonable cost.
AWS KMS – a system that allows you to manage, encrypt, and decrypt keys for various services.
DocumentDB – a fast non-relational database used for storing metadata.

There are dozens of other AWS tools we have worked with in previous projects. This cloud provider has various tools for every specific use case.

Of course, the choice of technology stack should be made by technical specialists on your team who know exactly how to develop SaaS applications correctly.

Tenancy Model

One of the features of cloud SaaS applications is that they can use one of two types of architecture: single-tenant or multi-tenant.

In SaaS applications, tenancy determines whether tenants share the same database, software instance, and computing resources. A tenant in this context is any business using the SaaS application.

In a multi-tenant architecture, the same database, computing resources, and application infrastructure can be shared among multiple tenants, but each tenant’s data is isolated and protected from other tenants. Multi-tenant architecture is scalable and easy to maintain. It is the best choice for software like customer relationship management systems or email marketing programs, such as Mailchimp, since they serve multiple businesses using shared infrastructure.

In a single-tenant architecture, each tenant has its own separate instance of the software, including the database, resources, and infrastructure. This approach allows developers to guarantee that users of the application do not share its resources with others. Single-tenant architecture offers advantages such as enhanced security and customizability. This type of architecture is the best choice for software providing financial services that require high security or for healthcare software, where providers may use single-tenant solutions to increase patient data privacy.

Choosing the optimal architectural approach for your application depends on your needs and requirements. The software architect, together with the business analyst, will help you select the appropriate tenancy model that fits your business needs.

Pricing Strategy

Even if your development team knows how to create a top-quality SaaS website, choosing the right pricing strategy is crucial: it can make or break your web application. While there are no hard and fast rules for pricing, several proven pricing strategies have emerged in the SaaS business model.

Freemium model allows users to choose between free and premium features. Typically, basic features cover the widest possible audience. To make such an application generate revenue, you need to convert free users into paid (or “premium”) users by offering an expanded set of features for a one-time or monthly fee. For example, Evernote offers free note-taking and syncing across devices. But you can pay for syncing with additional devices and storing more data in the cloud. Duolingo, discussed above, also uses a similar pricing strategy.
Pay-as-you-go model works as follows: the more actions users perform with the program, the more they pay. This model works well for companies like Amazon, which charges users based on the number of API requests their application sends to the server over a certain period. SMM platforms or accounting applications can also be monetized this way: the price depends on the number of scheduled posts or generated invoices.
Tiered pricing offers users different service packages based on their needs and budget. The idea of this pricing model is similar to the previous one: the more features your clients use, the more they pay. However, revenue becomes more predictable because you provide monthly packages. HubSpot uses tiered pricing, offering three packages – Starter, Professional, and Enterprise – targeted at companies with different needs.

If you want to launch your own SaaS product, you don’t necessarily need deep knowledge of SaaS development; starting the project with a discovery phase ensures you make the right choices regarding the technology stack, tenancy model, and pricing strategy before moving on to actual development.

What Are the Costs of SaaS Development?

Having learned about the stages of SaaS development, you are probably wondering how much investment is needed to create a SaaS application and then sell it to clients or other companies.

Of course, the cost of application development depends on the complexity of the product, its features, the chosen SaaS technologies, integration with other services, and so on.

If you choose to outsource web application development in Ukraine, the cost of an MVP SaaS product starts from $1 million USD. However, you don’t need to invest that amount in your project right away. You can opt for the discovery phase service, which costs from $10,000 USD. It will help you decide whether it’s worth investing more money in your startup. You will also get all the necessary documentation to start development and attract investors.

You can hire specialized developers if you need to supplement your existing in-house team with necessary specialists. However, keep in mind that developing a SaaS product in-house is more expensive than outsourcing to a SaaS development company, because it incurs many additional costs: you will have to regularly pay monthly salaries to each team member, provide office space, and all necessary software and hardware.

If you outsource the project to a third-party company offering SaaS application development services, you can avoid these issues: the SaaS development company will take care of everything, from team formation to further development of the full-fledged product.

You can also reduce the cost of custom software development by hiring a CTO as a service. A CTO (Chief Technology Officer) is a technical consultant who will help you solve all technical matters and thus avoid unforeseen costs that may arise from wrong technology choices. You can hire a CTO with deep expertise in SaaS development who will work for you on demand.

Conclusion

Cloud applications are not a solution for every business case, but the SaaS model is rapidly gaining popularity due to its benefits for consumers and application providers.

Suppose you decide to create a SaaS platform. In that case, you should prepare for a five-stage development process consisting of the discovery phase, application design, architecture design, development and testing, and application maintenance. Suppose you want to enter the market with a high-quality SaaS solution. In that case, you must complete all these steps and involve specialists with deep expertise in SaaS development.