Key Insights
- The cost to develop a SaaS application typically ranges from $60,000 to over $150,000, influenced by project requirements.
- Expense factors include features, API integrations, supported platforms, deadlines, and team location.
- Key cost elements include UI/UX design, front-end and back-end development, infrastructure, and ongoing maintenance.
With the rising demand for remote collaboration, SaaS services have become leaders in the software market, offering scalability and flexibility. The adoption of cloud solutions has made businesses more inclined to invest in cloud-based applications for enhanced security and accessibility, making SaaS development a strategic choice for staying competitive.
Levisoft draws insights from over two decades of experience in crafting high-functional SaaS products. This guide will provide a cost estimation and outline key factors affecting the price, supplemented by case studies demonstrating the effectiveness of such solutions.
Global SaaS Market Overview
The global SaaS market is projected to grow to $325.84 billion by 2028, with a CAGR of 6.2%. By 2023, the SaaS segment had captured 55.8% of market revenue, highlighting its dominance in the public cloud services sector.
Organizations across various industries are increasingly adopting cloud computing to enhance operational efficiency, foster collaboration, and reduce IT infrastructure costs. Notably, in 2023, the Software as a Service (SaaS) segment dominated the market, accounting for a substantial 55.8% share of revenue.
The State of SaaS 2023 survey indicates that an overwhelming majority of workflows are shifting towards SaaS-based solutions, with task automation being the top priority. Additionally, IT professionals have expanded their management and support portfolios to include 57% more SaaS applications. Below, we present SaaS adoption and planning statistics collected from a survey of 743 IT respondents.
However, before aligning with these companies, it’s crucial to understand the expenses involved in developing a SaaS platform.
Factors Influencing the Cost of a SaaS Product
After carefully considering the pros and cons, you've decided to develop a Software-as-a-Service (SaaS) application. Now, you're likely curious about the cost and timeline for creating a SaaS platform.
Unfortunately, there is no straightforward answer.
The cost can range anywhere from $60,000 to $150,000 or even more.
Several factors, each with varying degrees of impact, influence the overall cost of creating a SaaS product.
To delve deeper into this topic, let's explore the most significant factors that affect these costs.
Defining the Scope of Your SaaS Project
The first critical decision you must make is whether your SaaS application will function as a platform or a tool. These two types of Software-as-a-Service differ significantly in their core functionalities, target audiences, and overall scope.
This decision will directly impact the development costs and time required. Understanding the differences between a tool and a platform is crucial for making an informed choice.
SaaS Tools vs. SaaS Platforms
SaaS Tool:
- Limited in scope.
- Designed to perform a few key functions effectively.
- Solves specific problems but is not versatile.
Example: Buffer, a well-known SaaS tool, is designed for managing social media accounts.
SaaS Platform:
- Broader in scope.
- Utilizes multiple tools and functions.
- Targets a more extensive user base.
Example: Facebook acts as a large-scale service offering various tools for diverse purposes.
For those still developing a clear vision for their app, starting with a SaaS tool can be beneficial. It’s less expensive and quicker to produce, allowing you to consider adding more features in the future.
Complexity and Costs
We've compiled average prices for different levels of SaaS complexity:
Essential SaaS App Features
The required features for your SaaS app depend on the service it aims to provide. While a simple tool might only need basic functionalities, a more complex platform could require advanced features.
Key Features to Consider
1. User Management and Permissions
Sign-up, login, logout, and editable user profiles are standard features. Multi-tenancy and role-based access control become essential as the number of users and roles increases, impacting complexity and development costs.
2. Analytical Tools
Quality analytics, powered by AI, is increasingly popular. Features might include data metrics, dashboards, and real-time reports, requiring advanced technical expertise, impacting overall cost.
3. Security
Security and compliance are crucial, especially for applications handling sensitive data. This includes audit trails and multi-layered security measures, which can elevate development costs.
4. Communication Tools
Features such as chat, notifications, voice, or video calls can enhance user experience but also add to the development expense.
5. Billing and Account Management
Necessary for tracking payment histories and managing subscriptions, these features need to comply with relevant regulations like PCI DSS or FFIEC.
6. API Integration
APIs facilitate app interactions by transporting data to and from Internet servers. Using APIs can reduce some initial development costs but may incur ongoing fees.
7. Platform Compatibility
Decide whether your SaaS app will be web-based, mobile-based, or both. Developing for multiple platforms can be significantly more expensive.
Development Timelines and Costs
The average timeline for SaaS development ranges from 3 to 9 months. Here’s a detailed breakdown of stages and their approximate costs:
Validation and Planning
- Time: 40–250 hours
- Activity: Feedback collection, goal definition, and planning.
Creating an MVP or POC
- Time: 350 hours or more
- Activity: Developing a basic app to test viability.
UI/UX Design
- Time: 120–250 hours
- Cost: $40–$59 per hour
- Total Cost: $4,800–$7,080
Front-End Development
- Time: 400–600 hours
- Cost: $36–$60 per hour
- Total Cost: $14,400–$28,800
Sources
Back-End Development
Reducing Costs with Backend as a Service (BaaS)
You can significantly lower your expenses by opting for a Backend as a Service (BaaS) provider. This approach can help you avoid the high costs associated with building a complex back-end system from scratch.
Costs of Building the Back-End for a SaaS Platform
Building a complex back-end for a SaaS application typically requires creating it from the ground up using advanced backend frameworks. This method can be quite costly and should be reserved for exceptional cases. More commonly, a back-end can be provided via APIs, which is a more economical solution. The back-end is crucial for creating the necessary data structure and ensuring security, so it cannot be overlooked.
Back-End Development Costs
- Average Cost Per Hour: $40 to $65 or more, depending on the complexity of the functionalities.
- Estimated Time: More than 20 weeks to complete all stages of development.
Cost Calculation for Back-End Development
When considering back-end development, you have two primary options: hiring in-house developers or outsourcing to a reliable vendor.
Post-Release Expenses
Launching your SaaS app is just the beginning. Continuous updates, bug fixes, and feature enhancements are crucial for long-term success. Ongoing development, marketing, and compliance costs should also be considered.
Regional Cost Variations
The location of your development team significantly affects the cost. Below are average hourly rates by region:
- USA/Canada: Highest
- Western/Eastern Europe: Mid-range
- Southeast Asia/South America: Lowest
Sources:
https://www.glassdoor.com
https://ua.talent.com/en/
*All the data was taken from the Glassdoor website, converted to an hourly rate in USD, and calculated as an arithmetical mean between countries from each region.
Why Choose Levisoft as Your SaaS Development Partner
With over 8 years of experience, Levisoft has delivered solutions for various complex software projects across multiple industries such as healthcare, fintech, and logistics.
Here are some standout projects:
1. Operational Command Software Development
- Developed for social security during public events, this platform provided seamless information exchange and real-time coordination.
2. Biotech Enterprise SaaS Development
- Created a platform for remote device management and quality control, resulting in a 65% sales increase and enhanced customer loyalty.
3. International Trade Digitalization & Paperwork Automation
- Automated submission of customs declarations, resulted in 60% reduction in personnel costs.
4. Accounting Software Solution
- Developed a multi-tenant platform for financial management, achieving a conversion rate of 30% from the free demo version to the paid plan.
5. SaaS Fleet Management Software
- Improved logistics operations with real-time GPS tracking, reducing delivery times by 31% and fuel consumption by 14%.
Final Considerations
Given these factors, the cost of developing a SaaS application can vary widely. For instance, outsourcing to an Eastern European agency with average hourly rates can range from $58,000 to $353,000+.
Choosing a reliable development partner like Levisoft minimizes risks and ensures a successful project outcome. Our subscription-based service covers all common business needs at a monthly fee, offering cost-effective, advanced solutions.
Contact Levisoft to bring your SaaS idea to life.
Sources:
- Research and Markets: SaaS Global Market Report 2023 https://www.researchandmarkets.com/reports/5735157/software-service-saas-global-market-report?gclid=CjwKCAjw6vyiBhB_EiwAQJRopsJrUB6HcnfCaM3pjtjduQbfb795bHhilkeixzY7zepjY7MLta0gdhoCMzIQAvD_BwE
- Finances Online: 2023 SaaS Industry Market Report https://financesonline.com/2022-saas-industry-market-report/
- Vendr: The SaaS Trends Report https://www.vendr.com/insights/saas-trends-report-q1-2023#Rising-demand-and-digital-transformation
- Market US: Cloud Computing Market Report https://market.us/report/cloud-computing-market/
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