How to Build a SaaS Product in 6 Steps

Are we evolving as fast as the world around us? Will the on-premises approach be put off? Many entrepreneurs around the world ask themselves the same thing. The reason is that cloud computing has recently spread like wildfire. Cisco Annual Internet Report states that 75% of the total cloud workloads and computer instances will take the form of SaaS by 2022.

Then comes the question: how to build a SaaS product? Being a custom software development company, we are eager to share our expertise in custom SaaS development. So, you are about to find out what SaaS technology is, how to build a SaaS application, and why it is important for running and developing businesses.

What is a SaaS product?

SaaS stands for the software-as-a-service cloud computing model. Here, ready software is delivered via the Internet connection on a subscription basis. It means that a customer can access the software needed on any device with a web browser and an Internet connection.

In a nutshell, SaaS gives a great opportunity to save on costly hardware, because the data and applications are stored on remote data centers. In such a way, SaaS users do not have to deal with maintenance, compliance, and security issues. So, the costs of SaaS development will be lower in the long term.

Modern SaaS technology is realized in a huge variety of options. It allows building platforms that can connect apps, integrate Internet of things (IoT) solutions, and analyze big data. IoT and big data are considered to be the most popular technology trends. That is why learning how to build a SaaS product is a highly worthwhile investment.

There are a lot of different metrics on SaaS recognition, and the total size of the market is one of the most distinctive characteristics. The following statistics shows the growth of cloud worldwide market from 2020 to 2022 by Gartner’s research.

MarketWatch forecasts that the global SaaS market size will reach $703.19 billion by 2030. It will grow at a compound annual growth rate (CAGR) of 18.83% during the forecast period from 2022 to 2030.

You have definitely heard about the most famous SaaS products. Google Docs is perhaps the best-known example. It is a web-based software office-suite within Google Drive service.

Among other most prominent examples of SaaS providers are the following market leaders:

• Salesforce;
• Oracle;
• Amazon;
• Google;
• IBM;
• Slack;
• Microsoft;
• HubSpot;
• Shopify;
• Figma.

SaaS businesses are very competitive, but you don't have to build a cloud perfect solution to get started. Nevertheless, you should spot failures and work on fixing them before they become a reason to close your business.

Let’s see what factors influence the startup’s failure:

• No market need
• Unprofitable business model
• Ineffective marketing
• Poor product idea
• Lack of funds

To learn more about the reasons why startups shut down and how to prevent them we recommend you further reading: Why SaaS Startups Fail.

Advantages of the SaaS model

To explain such a sharp rise in the popularity of SaaS-based products, we defined their key benefits. These reference points will bring you closer to understanding how to build a SaaS product. Let’s have a look at them.

• Quick setup

The vendor’s cloud environment provides the installation and hosting of the software. Thereby, the deployment process speeds up, if compared to the traditional on-premises model.

• Cost-effectiveness

The on-premises model offers a license for an upfront cost. But the SaaS model implies very convenient subscriptions.

For example, Salesforce offers their customers the following pricing plans:

• Effortless updates

Customers do not have to buy and install upgrade packages to get the latest version of a SaaS product.

• Great flexibility

Software-as-a-service vendors provide many subscription models adjustable to any company’s growing needs.

If you want to know how to build a SaaS product successfully, you need to explore the main aspects of this approach. Let’s guide you into it.

You may also like: SaaS vs PaaS vs IaaS: Choosing the Best Cloud Computing Model

How to build a SaaS product from scratch

Step 1. Analyze the market

In the first place, you should find out whether it is a good idea to build a SaaS product you have in mind. Analyze the market segment you want to break into. If the on-premises approach prevails here, consider also outweighing the benefits of the model itself.

Before you start building your SaaS app, you need to understand the situation on the market. Ask the right questions like:

• Who is your target customer?
• What are their main pains?
• Who are your competitors?
• What essential/unique features do they have?
• What business models do they adopt?

This will allow you to define the high-level market requirements. Then, create a target market description alongside the crystallization of your vision. It should be clear and appealing to convince the users to choose your SaaS application among others.

The market analysis will help you explore business opportunities and find ones preferable for you. Analyze your competitors’ successes and failures. Thus, you will define appropriate strategies for SaaS product development services and understand how to build a cloud solution that will be in demand.

You've probably heard about the astonishing growth of Slack - an intra company communication platform. This SaaS-based platform generated $902 billion in revenue from March 2020 to April 2021. Nowadays, Slack has 12 million active users per day and 156,000 organizations subscribed.

Stewart Butterfield, a founder of Slack, believes that when developing a go-to-market strategy, it is essential to create a cloud product that differs from competitors'. This product also should play a significant role in your target audience's lives.

Stewart Butterfield highlighted three things the company has improved: search, sync, and ease of file sharing. With three points, Slack has become a leader among similar companies. Thus, you have every chance of success by focusing on what is valuable to your audience.

Step 2. Develop a business plan

A business plan is a roadmap for your software-as-a-service product development. Let’s describe the crucial points you should mention in your plan to know exactly how to build a SaaS product.

1. How can you distinguish your product from the others? Your company’s identity, product name, the value you want to share with your customers. Try to describe it in one brief sentence and make it catchy.

2. What are the main pain points of your potential customers, and how will your project solve them? Determine the problems you want to solve with your product.

3. How can you reach your target audience? Choose a marketing strategy for your promotion. Content marketing, social media, advertising, partnerships, etc. – there are plenty of options here.

4. How will you make money with your SaaS product? Define your monetization strategy. Consider different subscription plans, advanced support, some sorts of upgrades. You can use freemium, flat-rate, usage-based, tiered, or per feature pricing.

5. Where do you want to get financial coverage, and how do you want to spend it? Estimate your primary expenses, dividing them into different areas. Also, identify the funding sources for your enterprise. You can opt for your own budget, investments, or crowdfunding.

6. What are the goals to be achieved to realize your vision? And finally, create a list of fundamental goals for the first few months of your custom enterprise software solution.

The plan will most likely be subject to change. But it is a prerequisite for making your mind about how to build a SaaS product successfully.

Shopify is an online corporation that develops software for online marketplaces and physical retail stores. This software company is considered one of the most successful cloud-based platforms today.

Notably, the total revenue of Shopify in the first quarter of 2021 was $988.6 million. The company boasts a perfect fit with its mission, goals, business model, and product offering.

Step 3. Define SaaS requirements

The SaaS cloud computing performs a multitude of tasks resulting in a wide variety of features that occur in the SaaS development. But there is the core functionality that must be implemented in every SaaS product. Let’s highlight these essential requirements.

1. Multi-tenancy. Each customer, or tenant, shares the application instance and a single database. It is a cost-efficient option with lower maintenance costs of SaaS and larger computing capacity.

2. Self-service provisioning. It means that service delivery is established by automated processes. Therefore, it speeds up the whole procedure and makes it more consistent, stable, and scalable.

3. Security ensuring. SaaS includes users’ data encryption and application security. The second point incorporates the protection against a variety of security vulnerabilities. Security measures include identity management, access control, multi-factor and step-up authentication. Also, it is important to implement session handling for all SaaS application users.

4. User activity monitoring. Audit logs allow tracking changes and preventing intrusion. It plays a huge role in data protection and dealing with integrity and access issues.

For more specific functionality, learn from your rivals. We suggest you make a list of features required exactly for your niche by reviewing the competitors’ SaaS products. Differentiate between core features that address customers’ problems and nice-to-have ones.

HubSpot is a good example of a "fully integrated" company. The platform has products in every stage of the SaaS business model. This company's got you covered from the Social Media Marketing Platform, Content Management System (CMS), and Email Marketing Tools to the Analytics Suite.

The highest priority features from your list will be the foundation for the minimum viable product (MVP) of your SaaS application. We will explain this in detail in Step 6.

You may also like: How to Build an MVP for a SaaS Startup: Practical Tips

Step 4. Choose the technical stack

The technology stack is a list of the programming languages, frameworks, and tools used in software development. Nowadays, technologies provide a huge variety of options to choose from.

That is why the question of how to build a SaaS product and determine a solution stack is not an easy one. Yet another issue depends on the particular demands of your business. Thus, there is no stock answer to the question what frameworks and tools you should choose to build a cloud solution.

Let’s discuss the required SaaS app development aspects and the most popular choices to cover them.

Front-end

Front-end development is responsible for everything users see on the screens. For these purposes, you will need modern JavaScript frameworks that meet SaaS requirements – React, Angular, or Vue.js.

At Codica, we prefer React and Vue.js. React is the current market leader. Also, you should consider Vue.js if thinking of lightweight and easy-to-maintain apps.

Back-end

Back-end development is in charge of the server-side. Being invisible to the users, it builds the core functionality of your SaaS product and formulates its responsiveness. In this regard, you need to use a reliable framework, such as Ruby on Rails, Node.js, or Django.

Codica team is passionate about the Ruby programming language. We opt for Ruby on Rails to build a cloud solution as a fast, cost-effective, scalable, and secure framework.

Database

Databases keep the necessary information for your applications. We suggest PostgreSQL, MySQL, or NoSQL.

Our selection to build a cloud web solution is PostgreSQL, the most advanced open-source database.

SaaS hosting provider

To handle SaaS requirements, any reliable cloud provider will do, such as Amazon (AWS), Google, Microsoft, or Heroku.

We usually work with Amazon Web Services due to its reliability, flexibility, and security.

Do you want to build a highly scalable SaaS solution?

Talk to Codica SaaS experts and learn how to quickly bring your idea to reality.

Learn more about SaaS development

Step 5. Create your team

The fate of a product, without a doubt, depends heavily on the team that works on it. What team do you need to build a SaaS product?

To bring a successful SaaS-based product into reality, you need to hire a team consisting of:

• Business analyst;
• Designer;
• Software developers;
• Quality assurance engineer, or QA;
• Project manager.

Sometimes, finding the right specialists is almost as hard as coming up with a plan on how to build a SaaS product. Below you can see the three options you can count on:

1. In-house-team. It may be the first thing that comes to your mind, but do not jump to conclusions with this one. Such an option is a great idea for companies that have already gained success and have a permanent current workload. Nevertheless, this approach gives you full control of the development process.

2. Freelancers. It is the cheapest option provided to you by freelance workers. They might have considerable expertise in specific fields and technologies. But you need to manage their work and check on them constantly because there is a good chance they will be unreliable.

3. Custom software development company specializing in building SaaS products. It is a convenient middle ground between previous options. This approach will fit companies of all sizes, with different project scopes. You get a remote team providing high-quality services with no need to manage its work, and pay only for the actual work done.

An inexperienced team is one of the grounds why any cloud product fails. Only a team with expertise and high-skilled specialists can meet deadlines and develop a high-quality web product. At Codica, we use the best practices for building and implementing SaaS products from scratch. Also, we maintain and support web solutions after their delivery.

Our team consists of skilled professionals: project managers, UX/UI designers, QA engineers, and developers. We will be glad to help you build a cloud product and bring it to the market.

Step 6. Build an MVP

What do you need to launch a successful SaaS application and validate the value proposition? We have no doubt about it – creating an MVP is an advisable stage of your software-as-a-service product development.

An MVP is not a fully-fledged product, but it has enough features to attract early users and validate an idea. MVP is ready to enter the market and can further be scaled and amended.

Although it is not an end-product, it solves your customers’ critical problem. An MVP must appeal to your target audience and make people love your product. The primary purposes of launching an MVP prior to developing a fully-functional SaaS product are:

• Collect and analyze feedback. It provides very valuable information on usability and user experience. What did users like and did not? What functionality should be added/modified/removed?

• Test the waters. It allows you to check whether your application will suit the rapidly growing SaaS market. Also, you will know whether customers are willing to buy your services. Will there be enough demand for your application?

• Try different concepts. MVP gives the possibility to measure the effectiveness of business hypotheses. Focus on the whole impact of your SaaS application, not only on its features. Which way forward?

At Codica, we recommend creating an MVP in order to quickly collect feedback, check the technical implementation of the idea and demonstrate it to investors. For example, we developed an MVP for accommodation search for expats. The project idea was to facilitate the relocation process to Australia for people who found employment.

Further reading: How to Calculate the Cost to Build a SaaS App in 2022

Conclusion

The SaaS model, without a doubt, has produced a great variety of business opportunities. To take the best from it, follow our expert step-by-step guide on how to build a SaaS product. And of course, customize your software-as-a-service product to stand out in the best possible way.

Looking for an expert development team that knows how to build a SaaS application? Codica team will take care of SaaS development needs and help to realize your vision. Browse through our works or just reach us to discuss your idea.