How Much Does it Cost to Build a SaaS Application?

So, how much does it cost to build a SaaS application?

Factors that Influence the Cost of SaaS Development

A minimum viable product SaaS cost may vary between $50k and $150k. However, there are multiple factors that determine the cost of developing a SaaS platform, such as the type of the application, its complexity, and even the geographical location of your team.

Let’s analyze them in detail.

Type of SaaS Solution

To know the SaaS development cost, first of all, you should pay attention to the type of solution you are going to build. A simple CRM system with some basic features requires much less time and effort compared to a healthcare application that includes a number of integrations and complex functionality.

Product Size, Design, Complexity, Features

SaaS application cost greatly varies based on the overall complexity of your product. The availability of advanced core features, customization options, or industry-specific capabilities is much more expensive than basic solutions.

The additional SaaS cost is also provoked by the required level of integration with other systems and the need for extensive customization options. Extensive integration work required to connect the SaaS solution with existing infrastructure or third-party services, custom development work, tailored interfaces, or specialized workflows may incur additional costs.

Type of the Team

The type of team you decide to cooperate with also significantly influences the final cost of SaaS. For example, onshore outsourcing isn’t economically beneficial for businesses from the US or the UK, while hiring an in-house team will require even bigger time and money resources. The best option, in this case, would be to hire an offshore team that works for a lower hourly rate though offers a high quality of software development.

Startups that are limited in financing may consider cooperation with freelance software developers or offshore outsourcing to some Asian countries.

Geographical Location of the Team

The country where your development team works plays an important role in determining the SaaS costing. The price varies significantly across continents and countries, making outsourcing a viable option for businesses of different sizes that don’t want to overpay for software development. Here is the approximate development rate in different geographical regions based on Indeed, PayScale, and Glassdoor.                  

Cost by Product Size

In SaaS development, complexity can arise from various factors, including the functionalities, user roles, relationships, and the level of difficulty faced by developers. When creating a SaaS application, considerations such as scalability, robust data security, access control, payment integration, and customization can significantly impact the development process and the time it takes to complete.

Usually, based on the product’s complexity, SaaS applications are divided into four categories:                  

Cost by Type of Team

As it has been mentioned above, the cost of SaaS apps also greatly varies depending on the type of team you cooperate with. Let’s have a look at the pros and cons of each option for you to make the right decision.

In-House Team

Establishing an in-house team refers to the process of hiring software engineers who work onsite.

Advantages of Building an In-House Team:

• By building an in-house team, you have greater control over the team's activities and can directly manage their workflow and priorities.
• Language barriers and cultural differences are minimized since the in-house team works within the same physical location and time zone. 
• The team gains a comprehensive understanding of your specific project requirements, allowing for better alignment and a more tailored approach to development.

Disadvantages of Building an In-House Team:

• Hiring and maintaining an in-house team is expensive. Costs include salaries, benefits such as medical insurance, vacations, sick leaves, office rent, equipment, and the recruitment process.
• Building an in-house team requires time and effort to recruit and onboard skilled professionals.
• Finding developers with the exact tech stack needed for your projects can be challenging as you’re limited by geographical location.
• Once a project is completed, you may experience downtime where the in-house team's full capacity is not utilized.  

Local Development Company

Hiring a local development company, also called onshore outsourcing refers to hiring an IT company within your country.

Advantages of Onshore Software Development:

• Opting for onshore development allows for easier in-person meetings and collaboration.
• Sharing the same language and cultural background with the development team contributes to smoother collaboration, reduces the chances of miscommunication, and enhances the overall success of the project. 

Disadvantages of Onshore Software Development:

• Onshore software development is typically more costly compared to offshore alternatives, though still more cost-effective than hiring an in-house team. 
• The range of services and tech stack options could be narrower, as you are restricted to tech vendors located only within your country.

Freelancers

Hiring freelance developers involves engaging remote developers to work on your project.

Advantages of Hiring Freelance Developers:

• Freelance developers often offer lower costs compared to outsourcing or building an in-house team. 
• By hiring freelance developers, you gain access to a diverse talent pool from different parts of the world. 

Disadvantages of Hiring Freelance Developers:

• Uncertainty in meeting deadlines and quality standards: Working with freelance developers carries the risk of unpredictable timelines and varying quality standards. 
• Hiring freelance developers typically means that you need to search for and coordinate with other experts, such as QA testers, marketers, designers, etc., separately. 
• Freelancers may not provide post-development maintenance and support services, so you will face additional post-release expenses. 
• You face an increased risk of exposing confidential information or intellectual property. 

Outsourced Team

Outsourcing software development involves partnering with an offshore company that manages the development process on your behalf.                 

Advantages of Outsourcing Fintech Development:

• Outsourcing is a cost-effective approach as you only pay for the work completed, without incurring additional expenses like recruitment, employee perks, or infrastructure costs. 
• You gain access to a large talent pool of fintech developers with the specific expertise needed for your product. 
• A reputable outsourcing agency typically offers additional support services such as financial and legal support, business analysis, and post-development maintenance. 
• Time efficiency and focus: Outsourcing allows you to save time by entrusting the development process to a dedicated team. 

Disadvantages of Outsourcing Fintech Development:

• Significant time zone differences can pose communication challenges. However, prompt and effective communication may require careful coordination and adjustment of schedules to ensure smooth collaboration.

• When outsourcing, you delegate direct full-time control over the development process.

Estimating the Cost of Building a SaaS by Steps

Every product goes through a number of development cycles, each of them associated with a specific timespan that contributes to the final SaaS development cost. Usually, there are six main stages of the project life cycle:

#1 Planning

The planning phase establishes the primary objectives of the project and creates a high-level plan. It involves defining the problem, determining the scope of existing systems, and developing an effective outline for the upcoming development cycle.

Building a full-fledged product might be risky and rather expensive, so a good idea is to start with creating an MVP of your SaaS application which costs much less and will help you to validate your idea with minimum feature development. 

#2 Discovery Phase

The discovery phase is the initial research conducted before commencing the actual project development. It focuses on understanding the target audience, their needs, and the problems they aim to solve with the product. The importance of the discovery phase for the success of a telehealth app lies in:

• Developing a market-driven product
• Ensuring a superior user experience
• Designing prototypes
• Setting a clear product direction

#3 UI/UX Design

During the UI/UX design phase, the conceptual ideas gathered in the previous stages are translated into user interface elements and scenarios. This phase includes various stages such as design research, sketching, wireframing, visualization, and slicing, and usually lasts around two or three weeks, costing roughly $2.5K to $5K.

#4 Product Development

The product development phase involves the actual creation of the app and is typically the most time-consuming stage. It begins when the customer receives a statement of work (SOW) that outlines all aspects of telemedicine app development, including schedules, timeframes, and payments.

The development process is typically divided into sprints, during which the development team builds the agreed-upon functionality of the telemedicine app. Different software vendors may follow different methodologies, such as Agile and Scrum, to ensure flexibility and accommodate changes during development.

The front-end development takes around 9-12 weeks to complete while the back-end development may take around 20-25 weeks.

#5 Testing

The testing phase is where the QA team conducts multiple tests to identify any bugs or usability issues. If any issues are found, they are reported to the developers for fixing. This phase generally consists of six stages: requirement analysis, test planning, test case development, environment setup, test execution, and test reporting.

#6 Delivery and Maintenance

After final edits and pre-launch testing, the SaaS app is ready for deployment. Once deployed, it requires continuous maintenance and updates as outlined in the maintenance agreement. It is advisable to incorporate maintenance planning throughout each stage of the development process to ensure comprehensive coverage.

Cost by Additional Features

In today's market, where users pay for SaaS products on a monthly or annual basis, they have come to expect consistent updates and improvements. This creates a need for SaaS companies to establish a comprehensive roadmap of features to stay competitive. By continuously developing new features and enhancing the product, you can stay ahead of your rivals.

Having a well-defined feature roadmap plays a crucial role in accurately budgeting for development costs. When you have a clear plan in place, you can allocate resources and funds more effectively, ensuring that you meet your development goals within the set development budget.

For SaaS founders, it is imperative to allocate a budget for the development of new features and regular updates, including essential security updates.

How Long Does It Take to Develop a SaaS Application?

The same as the cost to build SaaS product, the time frame of development depends on a wide range of factors such as the complexity of your project, its size, niche, features, and design. If to judge from the average time that development stages take for the average, not complex project, we will have the following picture:                 

Ways to Reduce SaaS Application Development Cost

The good news is that you can always reduce the cost of building a SaaS product without sacrificing its functionality or quality of development. Here are some of the shortcuts you can take.

Automation

By leveraging automation tools and frameworks, developers can speed up the development process, improve efficiency, and reduce overall development time and costs. Automated testing, deployment pipelines, and code generation can save up to ⅓ of development and testing time.

Third-Party Services

Instead of building everything from scratch, think about integrating third-party services and APIs. Leveraging existing services for functionalities such as authentication, payment processing, data storage, and analytics is much more cost-effective compared to developing and maintaining those features in-house.

Flexibility with Hosting

Cloud-based hosting platforms like Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform offer pay-as-you-go pricing models, allowing you to scale resources based on demand. This flexibility ensures that you only pay for what you use, avoiding unnecessary expenses and optimizing cost efficiency.

Outsourcing

Engaging with experienced development teams or freelancers from regions with lower labor costs can significantly reduce development expenses. For example, the cost of software development in Eastern Europe is much lower compared to the US, the UK, or Western Europe due to the lower hourly rates of software development teams. However, it's essential to carefully evaluate and choose reliable and skilled partners to ensure quality and maintain effective communication throughout the outsourcing process.                   

Conclusion 

SaaS products are universal, flexible, and highly scalable. However, the development of a SaaS project often faces various challenges, one of which is the high cost involved. This expense is influenced by both the complexity of the project and the expertise of the development team.

Nevertheless, offshoring, which involves hiring developers from countries with lower rates, can be an effective strategy to save money and hire skilled developers. 

We hope that our article has provided valuable insights and a rough estimation for calculating the average cost to build a SaaS application.