Building a SaaS Application from Scratch: A Comprehensive Guide

SaaS Apps & Features

A tangible advantage of SaaS application development is the set of features and characteristics that make this type of software a number one choice for so many businesses and users:

• Multi-tenancy Model – SaaS applications are designed in a way that allows multiple customers to use the same application instance.
• Automated Provisioning – SaaS solutions provide the opportunity to define user groups by means of access management, subscription levels, etc. and set up service and feature provisioning based on that.
• Single Sign On – an authentication method in SaaS that provides users with the comfort of using a single set of credentials and log-in procedure to use different interconnected SaaS systems.
• Subscription-based billing – a cost-saving feature of SaaS applications that allows users to pay for the level and amount of services they actually need instead of buying an entire solution, overpaying for features they’ll never use.
• Availability – due to the cloud-hosted model, SaaS solutions are available to users from any location and device, provided they have internet connection. Many modern SaaS apps also offer their users such features as offline mode, which can usually provide access to a limited set of functions even without network coverage.
• Data Security – building a SaaS product, software engineering rely on the cloud hosting providers which take information security and digital security compliance guidelines very seriously. This means they take strict measures and best cyber security practices to protect their customers’ data.
• Audit – SaaS providers continuously log and track their product performance and security to guarantee service quality and ensure timely fixes.

SaaS applications are designed to be scalable and reliable, providing clear and on-demand services to both individual users and enterprises. Some of the mostly used and renowned SaaS solutions used to help companies enhance their business tactics and productivity are Salesforce, Hubspot, GSuite, Microsoft 365, Jira, and similar products.

Market Share

SaaS apps are typically cloud-based and can be accessible via desktop, mobile, and web application interfaces. Therefore, the market share of SaaS products has been growing significantly as it is used to develop applications. According to Fortune Business Insights, the worldwide software as a Service (SaaS) market is expected to expand at a 19.7% CAGR from around $251.17 billion to $883.34 billion from 2022 to 2029. On the other hand, according to Statista in 2021, the market share was close to $150 billion, which increased up to $195 billion in 2023, and is projected to reach $232 billion in 2024.

SaaS is one of the fastest growing software delivery models in the market with a fast growth rate from 2015 up to this date. When looking into regions however, it is visible that the US leads the chart for having most of the SaaS companies. Even though the American nation is in the lead, other regions, such as Asia, Latin America, and Europe are estimated to have a continuous growth in SaaS app development.

Countries with the most SaaS companies

Cloud development has become the precondition for the rapid growth of SaaS solutions as a result of the most recent technological transformations that occurred during and after the Covid pandemic. So, when we examine cloud service models, we can see that a significant number of public SaaS businesses generate more than $500 million in annual revenue while 70% of software that companies use is SaaS.

Advantages for users

• Ease of Use
  SaaS products have simple user interfaces even for non-technical users. They’re easy to use as they are tailored to fit the news of each user.
• Availability
  SaaS products can be accessed from anywhere as long as there is an internet connection. These products enable users to access their software and data from any device and simplify remote work.
• Scalability
  SaaS products are built to be scalable, which means they can grow and adjust as the requirements of their users change. Adding users, storage, and features is simple and requires no additional hardware or software.

Advantages of Launching a SaaS App for Business Owners

• Low Entry Barriers
  SaaS products have minimal entry barriers. This means that starting a SaaS business requires less initial investment and technical expertise than conventional software development models.
• Recurring Revenue
  When compared to conventional software licensing models, SaaS offers a more predictable revenue stream. This predictability can assist SaaS firms in managing cash flow, planning growth, and making strategic choices.
• Potential for Growth
  Small and medium-sized businesses are able to boost their customer engagement by using SaaS products promoting their potential business growth.
• Integrated with your Stack
  Because most SaaS applications are designed with integrations in mind, the SaaS business model is highly customizable.

1. Business to Business

Business-to-business, or B2B, apps are meant to serve entire organizations, rather than individual users, in digitalizing and streamlining their internal operations. Apps in this category provide such services as:

• Customer Relationship Management (CRM)
  CRM products help businesses automate and manage interactions with their customers more effectively by offering a variety of features:
  • Sales Management
  • Marketing Automation
  • Customer Support
• Enterprise Resource Planning (ERP)
  These SaaS products provide the functionality critical for maintaining, tracking, and automating business-critical information and processes:
  • Finance
  • Human resources
  • Accounting
  • Procurement
  

  Curious about ERP systems? Dive deeper into the world of enterprise solutions and learn how to build an ERP system from scratch in our article.

• Content Management System(CMS)
  CMS software allows business owners to easily create, manage, edit, and publish different types of content on their website. SaaS CMS typically provide the following functionality:
  • Data indexing, search, and retrieval
  • Format management
  • Content revision
  • Publishing
  • Collaboration
  • SEO tools
• Project Management Software
  Task management, team collaboration, time tracking, documentation management, and project progress monitoring are some of the solutions that Project Management SaaS products offer for businesses.

Let’s consider some examples:

2. Business to Business

Also known as B2C applications, these are intended for transactions between companies and their direct customers. Such SaaS apps are commonly used for e-commerce (online stores, electronic payments, and order tracking, online marketplaces), audio and video streaming platforms, messengers, social media, and a variety of consumer-facing apps.

Here some B2C SaaS product examples:

Finally, to end this section, the following app can be categorized as both, business to business and business to consumer product, due to its versatility and wide user base:

Architectural Layers in SaaS Applications

The front-end, back-end, and database layers are the three basic levels that make up the SaaS application system.

• Front-end Layer
  It is responsible for the UI/UX of the SaaS app. It is the area of the program with which users have direct contact. The following are the main elements of the frontend layer:
  • UI/UX design;
  • Client-side development framework (React, Angular or Vue.js are commonly used to build user interfaces);
  • Communication with the back end (to request and process data, the front-end interacts with the back-end through APIs (Application Programming Interfaces). RESTful APIs are frequently used for this purpose in modern SaaS systems.
• Back-end Layer
  On the other side, the back-end layer typically manages the business logic and functions of SaaS applications. It’s components can include:
  • Application Servers
  • Access control measures
  • Business logic
• Database Layer
  The database layer manages and has control over the application’s data. It could be a more common relational database system, such as MySQL, PostgreSQL, or a NoSQL database, depending on the needs of each application. Commonly used database types in SaaS applications include:
  • Relational Databases (aka SQL databases)
  • NoSQL Databases (Column-oriented, Document-oriented, Graph, Key-value, etc.)
  

  Multi-layered architecture of SaaS apps

Any database layer always has data replication and backup mechanisms to guarantee data integrity and ability to recover.

SaaS Applications Architecture Patterns

To begin with, it’s important to mention that all software architectures belong to either of general design approaches: single-tenant or multi-tenant architecture. Tenants are customers that have access to your SaaS environment.

In a single-tenant architecture, only one customer can access an instance of the app with isolated (dedicated) server, database, and application layers. This approach is typical for applications catering to strongly regulated industries, such as finance or healthcare, running on a private cloud to ensure extra security. It also provides more control and app customization opportunities for the tenant. The downside of single-tenant architecture is greater cost associated with cloud vendor fees and maintenance.

Meanwhile, multi-tenant architecture allows multiple customers access to a single application instance, sharing the same server, database, and infrastructure. They are just logically separated, meaning they can customize the app to a certain extent, but have no control over the hosting infrastructure. This shared environment is more cost-effective and can offer practically unlimited scalability, however, each tenant’s activities may have an impact on their “neighbors” and they need to take extra security measures to guarantee data privacy. Most consumer-facing SaaS apps have multi-tenancy at their core.

Single-Tenant vs. Multi-Tenant architecture

Moving down to architecture patterns, we can name many of them, including such interesting ones as space-based, broker, or master-slave patterns. In SaaS, though, the most popular architecture patterns are service-oriented architecture (SOA), serverless architecture, and event-driven architecture (EDA). We’ll discuss them in more detail.

Service-Oriented Architecture (SOA)

In SOA, the apps are composed of interconnected services that communicate with each other through APIs. Each service here represents a specific business function within the entire system, for example, login, payment, application processing, etc. SOA emphasizes reusability, as the same services can be shared and used in various applications. Contrary to rather old-fashioned and impractical monolithic structure, SOA provides more flexibility and saves time for developers.

Microservices

Microservices Architecture

A variation of SOA, microservices architecture lets you separate your SaaS software into more manageable, loosely coupled services with even more granularity. This means that, unlike in SOA, if a certain service fails, it won’t impact the entire ecosystem and other services will continue to operate as usual. These are microservices that can be developed, deployed, and scaled independently and have a specific business capability.

Serverless Architecture

Serverless Architecture

This name doesn’t suggest your app will run without servers. You will still need servers to host your infrastructure, but it will be the provider’s responsibility. This is why it is also called Function-as-a-Service (FaaS). With serverless architecture, you can focus on developing business logic rather than setting up infrastructure or managing servers. Autonomous scaling, cost optimization, and reduced operational complexity are all included. This way, you use the computing resources wherever they are needed and pay accordingly.

Event-Driven Architecture (EDA)

This is an architecture pattern in which many application components communicate and are triggered by events. Events are specific user actions or data changes. Components follow and respond to particular events associated with them. Because components don’t have to explicitly know about one another, EDA encourages loose coupling. EDA is good for real-time interactions systems, such as graphic design editors and similar.

Event-Driven Architecture

Apart from architecture patterns, we have to mention the approaches to SaaS application development and deployment at the basic level. These are containerization and CDNs.

Containerization

As an application virtualization approach, containerization involves packaging an app instance and its libraries, runtime, etc., into an isolated container. Each container is lightweight, portable, and can run consistently regardless of the environment and OS. We can place a multitude of such containers in any hosting infrastructure, yielding the same result. This is considered a more cloud-native and efficient approach to app virtualization than using virtual machines (VMs).

Caching and Content Delivery Networks (CDNs)

CDN is a way to deliver content to geographically distributed users that helps significantly improve user experience through enhancing application performance. CDN consists of a network of servers – nodes, or network edges, that cache content and are located as close as possible to end users. At the same time, these notes do not store this content and cannot function independently from a standard web hosting service.

Tenancy Models

The term tenants refers to the group of users that can use an instance of a SaaS application that is hosted on a particular server, with its dedicated infrastructure and database. There are three tenancy models to follow when creating SaaS applications.

1. Single-tenancy
   This Is the model, which offers the greatest security. In this case, every tenant hasaccess to their own dedicated instance of a SaaS app. The benefits of this model include:
   • Security: due to the simplicity of the model. Having a single user to a one server only means that the system isn’t too exposed.
   • Customization: single-tenant model allows to have more control over the entire environment and application functionality.
2. Multi-tenancy
   In contrast to the single tenant model, this one implies that numerous tenants share a single version of an app, but their actions and data are logically separated. It is cost-effective, but needs more security management than a single-tenancy SaaS app.
3. Mixed tenancy
   This hybrid model combines aspects of single and multi-tenancy. This is where tenants share parts of the application that may be shared by multiple tenants, while others stay separate.

Monetization Model

It is also known as the revenue model for apps that allows customers to pay recurring fees to utilize cloud-based services software apps. SaaS companies produce revenue through a variety of monetization strategies, including the following:

1. Subscription-based
   This is the most common SaaS software monetization strategy among all of them. Subscribers must pay a monthly or annual subscription fee. This is beneficial for apps that provide ongoing services to users.
2. Freemium
   Potential users can test the capabilities of the product free of charge before subscribing. This is done by taking advantage of free trials or free but limited versions of the product.
3. Pay-as-You-Go
   If you are looking to broaden your clientele, this is the ideal revenue method since users get charged based on software usage, such as the number of active users, data storage, or API calls. This is typical for pay-per-use products offering cloud storage or video conferencing.
4. Tiered pricing
   SaaS vendors usually give several tiers or plans depending on the functionality they provide. A premium plan may allow more users and features while a basic plan may only allow a limited number of features to one-to-several users.
5. Per-User Pricing
   SaaS companies typically use the per-user pricing model to bill customers based on how many users access and utilize their service. This pricing structure is suitable for SaaS solutions used by groups or organizations who need access to the platform for a large number of users.
6. White Labeling/Reselling
   You can aim to broaden your client base and boost sales if you decide to work with other companies as resellers, paying them a commission for distributing your product. This approach will make your product available and visible to more people.
7. API Access
   If your SaaS app is a tool that can be used by other software products and services via an API gateway, you can monetize on providing other parties with access to your system and resources.
8. Mixed
   The mixed strategy makes up a combination of other monetization models and will work for you if you want to optimize profits and maintain business growth. It is a complex strategy to better drive revenue and react to various obstacles which requires flexibility and good knowledge of your industry and competitors.

Hiring a Development Team

Hiring a development team does not have to be viewed as a difficult task. However, in order to have top-tier software products, it is critical to find the team that will not just be professional, but will also share your business values, deeply understand your product, and adhere to what they commit to. We suggest considering several key aspects when looking for software development professionals to create a decent software-as-a-service solution.

• Define your requirements: Before you begin to look for your development partners, make sure you have a firm grasp on your project needs. This may include the team size, approximate tech stack, essential features you want to develop, timeline, main goals, and so on. Ask the potential candidates for business partnership to provide their project estimates, compare them with each other and against your expectations, and see what will work best for your company.
• Look for experience and references: Referrals expose experience. It can be considered as a background check. Look for the potential team’s expertise as well as references from previous projects and clients. Waverley’s development team is proud to have many referral-based clients and a growing number of positive reviews. You can check them out on the Clutch platform.
• Consider engagement models: This is where you decide to either expand your in-house team or to outsource the entire development process. While the former model lets you have more control over the development process, the latter frees your time and resources for other business activities. Regardless of your choice, the team you hire will accommodate to your requirements and needs.
• Look for skills: Developers will need to have relevant technical abilities, expertise, and experience in the tech stack required for your SaaS solution, also known as hard skills. However, keep in mind that this must be supported by well-developed soft skills in order to create an excellent working environment and ensure adequate teamwork.

You can learn more about the process and criteria of getting a team of professionals to handle your development project in our blog article on how to hire developers in a dedicated team.