In 2022, the SaaS market should reach $220 billion at a 13.1 CAGR. The global cloud revenue has spiked 17.3% in the last year, a positive sign for SaaS Applications. In 2020, SaaS companies made over $72.2 billion overall, and this number is expected to rise by 16.4% by the end of 2021.
These statistics indicate that investing in a SaaS product is a great decision. But what is the total cost of ownership of SaaS? Well, if this is the question on your mind, this article is for you.
Here we'll discuss the following:
- Benefits of SaaS applications
- Challenges faced while developing a SaaS product
- Factors affecting the cost of developing a SaaS application
Benefits of using a SaaS Business Model or Developing a SaaS Product
- Faster Setup
The traditional model requires you to build the server, install the app and configure the same. It is a fairly cumbersome and time-consuming process.
SaaS has the upper hand here. This model allows you to place the applications on a cloud server. This way, anyone can use the app from their mobile, laptop, or computer. No installation or configuration is required.
- Lower Costs
Developing a software application can be expensive. After all, you need to create platform-specific applications, market them, and release and update them from time to time. Along with the maintenance, this can amount to a substantial overall cost.
But you can save a significant amount of money with a SaaS product. It's because you need not develop a platform-specific product. A single SaaS product will work on mobile and desktops. Also, you won't have to market differently for different platforms, which will help you save good money in the end.
In the traditional model, one must purchase a license for on-premise solutions, which can be quite costly for your customer. However, you can cut these expenses with SaaS. It's because SaaS-based software considers the number of emails, users, and the data stored for licensing. This way, your customers will pay only for what they want.
Overall, developing a SaaS product is suitable for your company and customers.
- Scalable and Flexible
SaaS applications or products are more scalable, as they don’t require your customers to update their hardware. So you can introduce the hardware updates to your server whenever needed.
Start-ups or aspiring entrepreneurs can use SaaS apps and compete better in the market.
Apart from being scalable, the SaaS model is flexible. As a result, your customers can add or remove features as they like, providing flexibility to the customers.
Before you can enjoy the benefits, you need to develop a SaaS product. And this journey brings several challenges. Want to know what those challenges are? Read along.
Common challenges faced while developing a SaaS Application
- Creating a customizable system
One of the many things that make a SaaS product great is its customizable nature. If your SaaS product is customizable, tenants can easily modify it as per their requirements. For example, one can optimize colors, template layout, subdomains, features, etc.
Although it can be challenging to offer customizations and meet the unique requirements of your customers, your business will benefit in the long run.
- Ensuring absolutely zero downtime during deployment
Another challenge start-ups/businesses face is the SaaS app downtime, which is the duration for which the product or service becomes unavailable to the user.
However, you can use the zero-downtime deployment strategy to tackle this issue. This will ensure full responsiveness of the SaaS product even during the deployment. Unlike traditional methods, customers will be able to use the service while the deployment is underway.
- Integrating third-party services
Your customers will want to integrate multiple apps into a single SaaS product. After all, who wouldn’t prefer a single app for everything over a cluster? However, this can be pretty challenging during development.
But you can deal with this by choosing the apps that offer APIs for integration. For instance, you can use PayPal, QuickPay, or Secure Trading for payments. Such apps offer an API that the developers can integrate almost instantly.
However, developers take testing such integrations for granted. But make sure never to do that. Test different scenarios after third-party integration to ensure everything is intact.
- Managing the time and cost
It takes anywhere between 5-7 months to develop an application. However, If the management is poor, the development will take more time, which will cost you more money.
Therefore, as a start-up, always keep an account of time. Also, be strict when it comes to deadlines. This way you'll be able to deliver quickly and save money too.
- Avoiding limited target audience
A limited target audience isn't good for your business. However, most start-ups tend to ignore this fact. Instead of finding a larger audience, they bring something unique, which is useful only to a handful of users. This is best avoided.
You should always focus on a larger audience. But it never means you should consider everyone your target customer. Just strike a balance and target a good number of people that'll find your business beneficial.
- Poor execution
It's one of the most underrated yet essential challenges of developing a SaaS application.
Even if the idea is good, poor execution can lead you to doomsday. So, always plan out every aspect of SaaS development before starting the process. This will help you ensure better execution of your SaaS product.
With that said, let's focus on the cost structure of SaaS product development.
The cost structure for SaaS App development
Whether it's an app or a website, hosting is necessary. A hosting service provider helps keep your asset online and accessible to the customers. Also, it allows the application or website to make the most of its functionalities.
So, make sure to include hosting in your SaaS development cost structure.
- Phone Lines
You need at least two phone lines: one for assistance and the other for the office. However, if you have a larger team, add up 2-3 more of these phone lines. The purpose here is to offer smooth communication among the employees and seamless customer support.
- Continuous Development
You cannot develop a SaaS platform, release it and call it a day. Regular/continuous development is quite essential. If you don't develop continually, it's only a matter of months before some other company releases a better update of your SaaS product.
So, make sure to introduce regular updates and develop continuously. This way, your customers will get new features timely and won't need to switch to any other platform.
Yes, this will add to the cost, but your company will benefit in the long run.
This may seem unnecessary, but insuring your company's assets or employees will benefit you. So, always consider this cost while developing a SaaS application.
Yes, you need a phone line, hosting, and insurance. But do you know what's even more important? A skilled team of experts. Your employees are your company's face who help introduce innovations. Also, you need a staff that ensures every problem is handled with agility and on priority.
Furthermore, your employees will offer the support your customers need. So, make sure to hire the best and offer the best compensation to your employees.
These were some common things that you must include in your cost structure. However, you can include more if your company/start-up has specific requirements.
Let's now learn about the factors that impact the cost of creating a SaaS product.
What factors contribute to the cost of building a SaaS Product?
- Scope of your SaaS application
The scope is the most crucial factor that helps determine the SaaS product development cost. And this scope depends on what you’re building: A SaaS tool or A SaaS platform?
SaaS tools have a limited scope. Such tools are meant to perform one or two tasks at most. On the other hand, platforms come with a diverse set of tools. You can possibly perform several functions using SaaS platforms.
- SaaS Platform vs. SaaS Tool: What to choose?
Well, this depends on the technical requirements and how experienced you are. If you are new to the SaaS world, it's better to work on a tool and keep the scope limited. This way, you can develop a reliable SaaS product quickly.
Once you become profitable on your MVP, you can add more features. This will help you eventually convert your SaaS tool into a SaaS platform. Also, you'll end up saving good money.
However, if you're experienced, you can go for the SaaS platform. But note that the process of SaaS platform development is more time and money-consuming.
Please Note. Always decide the scope of your SaaS product before starting the development. This will help improve the execution and thus the overall results.
- Outsourcing the Development
If you're busy with your business, you'll have to outsource the SaaS development. Here are the three available options:
- Onshore: Here, you choose an outsourcing company within your country.
- Offshore: Here, you choose an outsourcing company outside your country.
- Nearshore: This is similar to offshore outsourcing, but the company is located in a country near your country.
Choosing an outsourcing type depends on several factors. Also, every outsourcing type has different advantages, disadvantages, and costs. So, choose wisely.
- The total cost of ownership SaaS or budget
Once you determine the total cost of ownership SaaS, you can easily decide the overall budget of your application. And to decide the total cost of SaaS ownership, you need to consider licensing, updates, training, and technical support along with subscriptions.
You should make up your mind to manage the total cost of ownership SaaS even after one year. It's because sometimes, the total time required to develop a SaaS application might extend. And during that time, you should be ready to meet all the direct and indirect expenses.
- Functionality or features
The number and quality of features you incorporate also impact the total cost of ownership of SaaS. So, if you include more complex features, it will add up to the total cost of SaaS.
However, you can plan this out. First, create a list of wishlist features and must-have features. Then if your budget allows, you can incorporate the Wishlist features in your app.
Do you want to launch your app for single or multiple platforms? Choosing a single platform is going to save you money. However, it'll also limit your app's accessibility to the chosen platform.
And if you choose multiple platforms, the costs will dramatically increase. However, cross-platform apps are more beneficial in the long run.
You can connect with a reliable SaaS app development company such as ATC. This company has been in cross-platform SaaS development for years. So, this company can offer you trustworthy results.
- API integration
There are two ways of creating SaaS apps with the backend functionality. You can either create backend features from scratch or simply connect an API. And logically, using an API is more cost-effective and easy to implement.
You can easily scale your business and cut down the time required to develop apps using API. So, if you want to keep your budget low, make sure to go for API integration over creating the features from scratch.
- Marketing and advertising costs
The expenses don't end when your app is live. Instead, you need to take care of the marketing and advertising expenses. Also, you need to choose the marketing channels, target audience, and marketing platform.
- Legal expenses
Your SaaS product should comply with legal terms & conditions. Also, you need to pay the required legal fees for compliance, which vary from state to state and country to country. Overall, this can significantly impact the cost of SaaS development.
- Costs of accounting
Let's hope your subscriber base grows and you make more money. Now, this means you need to pay taxes and manage bookkeeping. Also, you might need an expert for auditing and preparing financial statements. All this also contributes to the total cost of ownership of SaaS.
- Freelancer or a complete team: Who should you hire?
Who should you hire: a Freelancer or a complete team? Now, both these options can impact your total cost of ownership SaaS significantly.
Hiring a quality freelancer may seem like a beneficial deal, but it's not. It's because you'll have to gather numerous individual freelancers to handle different aspects of SaaS development. As a result, you’ll have to hire an entire team.
Now, if you will eventually hire a team of freelancers, why not hire a complete team beforehand?
So, all in all, you should hire a complete team. This will help you keep the total cost of ownership SaaS under control.
So, what's the total cost of SaaS ownership?
The cost of development can range from $10-250K. This is just a vague estimate, and the total cost of ownership of SaaS can be way higher. Several factors can affect it.
However, if you consider the above factors, you can get a clearer idea. Also, if you need professional help for a more genuine cost estimate, click here.
To conclude, this article reflects on two main things: the common challenges faced while developing SaaS applications and the factors you need to consider to determine the total cost of SaaS ownership.
You can use the above information in your favor and lower the overall costs of SaaS product development.
It’s essential to hire a team of experts to help you develop a SaaS product. Where can you find one? Well, ATC has got you covered.
ATC is a technology consulting company that helps entrepreneurs and start-ups convert their ideas into a beautiful reality. We incorporate disruptive technologies and create customized SaaS tools and platforms for our clients.
We're a full-fledged team of seasoned experts ready to help you win. So, If you're an entrepreneur or start-up looking forward to winning, contact us now.