As the market for Software as a Service (SaaS) continues to grow, it’s becoming an increasingly popular choice for both businesses and consumers. SaaS products are known for providing more strategic value and flexible solutions, which is why they’re often chosen over traditional software solutions. Not only do SaaS solutions offer low overhead, but they also have high profit potential, making them an excellent choice for new businesses.
Many businesses often come up with a question – how much does it cost to build a SaaS App in 2024 and 2025 or beyond? While SaaS products have the potential for significant growth and success, the development costs can be quite high. Despite not having to invest in technology or products like other companies, SaaS development costs can still add up.
According to Statista, SaaS market revenue is expected to reach 232 billion dollars in 2024, a significant increase from 197 billion dollars in 2023. If you’re considering creating a SaaS app, it’s important to consider the costs involved.
For more insights and tips on developing a successful SaaS product, check out SaaS Development Secrets to learn best practices for building and optimizing your SaaS app efficiently.
What is SaaS App Development?
SaaS (Software as a Service) is a cloud-based software program that offers various online features and services to users for a monthly fee. This type of app can be accessed via a web browser, which means there’s no need for users to install software on separate devices or servers. The service provider is responsible for hosting and managing the SaaS app, which eliminates the need for customers to manage infrastructure, upgrades, and maintenance tasks.
One of the main advantages of using a SaaS app is its cost-effectiveness, scalability, and flexibility. This makes it a popular option for both individuals and companies looking for easily accessible software solutions. SaaS app development involves creating a delivery model in which a solution provider hosts an application and makes it accessible to consumers online.
This process includes designing and developing a safe, dependable, and scalable application, hosting it on a server, and maintaining accessibility through the use of necessary skills and tools.
SaaS Global Market – The Market Overview
The global SaaS market is experiencing a significant annual growth rate of over 11.7% and is projected to reach a massive $374.48 billion by 2026. Businesses worldwide are embracing the SaaS revolution due to its agility, flexibility, and scalability. North America is leading the way in SaaS adoption, accounting for almost 67% of the market share.
However, the Asia-Pacific region is quickly catching up, fueled by digital transformation initiatives. Moreover, the SaaS model’s cost-efficiency is its main appeal – organizations can reduce IT costs by up to 25% by adopting it.
Factors Influencing the Cost of SaaS Application Development
Depending on the type of business model, the cost of a minimal viable product SaaS may range between $50k and $150k. However, it is important to keep in mind that the cost of developing a SaaS platform depends on many factors, including the application itself, its complexity, and the location of the SaaS app development partner.
So, let’s explore in detail.
1. Project Scope
It’s important to keep in mind that the cost of a SaaS application can vary greatly depending on the complexity of the product. Advanced core features, customization options, and industry-specific capabilities tend to come at a higher price point than basic solutions.
Additionally, the level of integration with other systems and the need for extensive customization options can also increase the cost of a SaaS solution.
If there is a lot of integration work required to connect the SaaS solution with existing infrastructure or third-party services, or if there is a need for custom SaaS development work, tailored interfaces, or specialized workflows, then there may be additional costs involved.
2. Features
When it comes to establishing the price of SaaS products, several components need to be taken into consideration. The features provided by a particular SaaS package can have a significant impact on its length and price. When starting a project, app developers focus on fundamental features while creating a Minimum Viable Product (MVP).
After receiving consumer approval, they can then move on to develop a complete product. As a result, the cost of SaaS development can vary depending on the quantity, nature, and complexity of the features. Some of the essential features required for any SaaS application when hiring dedicated developers include:
1. User authentication and authorization – to ensure secure access to the application.
2. Payment gateway integration – to facilitate secure online payments.
3. Scalability – to allow the application to handle a growing number of users and data.
4. Data security and privacy – to protect sensitive user data from unauthorized access.
5. Analytics and reporting – to provide insights into user behavior and application performance.
6. Integration with third-party services – to enhance the functionality of the application.
7. Customer support – to provide timely assistance to users in case of any issues.
These are just some of the features that need to be considered while developing a SaaS application. The cost of SaaS app development will depend on the specific requirements of the project and the complexity of the features involved.
3. Types of SaaS Products
It’s important to note that the type of software plays a significant role in determining the cost of developing a SaaS solution. Some SaaS projects can be particularly challenging due to the inclusion of numerous new features and the sensitive nature of the data that needs to be managed.
For instance, accounting software requires cutting-edge data protection methods to safeguard critical financial information from leaking. Similarly, ERP software development for large organizations can also be complex and result in higher costs.
4. Platform Type
It’s true that choosing the right platform for a SaaS product largely depends on the target audience. For B2B companies whose clients mostly use laptops or desktop computers, creating a web application would be the best choice for them.
On the other hand, B2C businesses may opt for mobile applications since their customers tend to access their products or services through smartphones. Even though the core information may remain the same, the user interface and experience can significantly impact the cost of a SaaS product.
5. Create the MVP
Building an MVP (Minimum Viable Product) is a smart approach to validate the concept of your app before investing in its full development. With an MVP, you can gather feedback from users, assess the product’s viability, and make informed decisions about further investment in the project. The focus at this stage is to deliver a rock-solid basic version with all essential features, even if it doesn’t have all the bells and whistles.
The cost of developing an MVP can vary depending on the features you want to include. It can take approximately 300 to 700 hours and cost between $17,500 to $30,000 with an hourly rate of $20 to $60. However, sometimes an MVP can be as simple as a landing page or explainer video, which means you don’t have to spend a significant amount of money in the early stages.
6. UI/UX design
Design is a crucial factor that can determine the success or failure of a project. Therefore, it is important to allocate the necessary budget for it. The design process involves extensive research, wireframing, prototyping, iterative testing, and refining based on user feedback.
The complexity of your project will determine the duration of the design process, which can take anywhere from 120 to 250 hours. The cost of UX design ranges from approximately $20/hour to $40/hour, which means the total investment for this phase can range from $2,400 to $5,000.
7. Third-Party Integrations
When it comes to developing a new project, one of the key decisions for the development team is whether to use third-party API connectors or to create a custom back end from scratch to achieve a high level of customization. For commonly used functions such as payment processing, subscription management, and user login, it may be more cost-effective to select pre-built APIs.
However, SaaS developers need to follow best practices, including reviewing documentation, selecting reliable APIs, conducting security audits, and addressing scalability concerns. Each of these procedures is a small project in itself and requires a great deal of expertise and time, which can drive up overall costs.
8. Testing
A QA team conducts multiple tests on the application to ensure there are no bugs or usability problems. We report issues to developers as soon as they are discovered so that they can be resolved. Generally, the phase of testing requires six steps: requirements analysis, testing planning, developing test cases, setting up the environment, executing tests, and reporting results.
9. Post-Release Expense
It’s a common misconception that the development of a SaaS product is the end of the road. Contrary to popular belief, this is not the case. Post-release, there are several expenses to consider, including those related to hosting services, maintenance servers, databases, and integrations.
It’s also important to remember that you can always bring improvement as you grow. All of these factors, and more, will contribute to the total cost of ownership (TCO) of the product.
How Much Does it Cost To Build a SaaS Application?
Based on industry research, the average cost of building a SaaS platform can range from $40,000 to $130,000, and sometimes even more, depending on factors such as the complexity and scope of the platform. In some cases, startup costs can extend up to $300,000.
However, it’s worth noting that SaaS companies tend to enjoy high gross profit margins, typically ranging between 68% to 75% or higher. So, as long as your SaaS platform can retain a solid user base, you can expect to make good profits regardless of the type of SaaS solution you offer.
Conclusion
Hence, the cost of developing a SaaS platform can depend on various factors, such as the complexity of the project, the technology stack used, and the development team’s expertise.
However, partnering with a reliable outsourcing partner with skilled, experienced professionals can help ensure the development of a robust SaaS platform while optimizing costs. While rough estimations may provide some insight, consulting with a professional SaaS development team is vital for precise and tailored cost assessments.
