The demand for SaaS (Software as a Service) products has skyrocketed, increasing competition in the market.
That’s why, if you’re going to create a SaaS product that can compete in the market while generating revenue, it’s important to know everything about SaaS product development costs.
That said, figuring out the cost of SaaS product development can be challenging. This is especially true considering the costs can vary widely based on several factors such as product complexity, functionality, and the technology stack you choose to use.
In turn, you may end up overestimating or underestimating the budget, causing significant financial setbacks for your business.
That’s what we’re here to help you with!
We’ll cover everything you need to know about the cost of SaaS product development and give you a better idea of what to expect when developing your product.
The cost of SaaS product development can range between $40,000 to $200,000 and even exceed this.
That said, there is no one-size-fits-all answer to this question, as the overall cost will vary based on multiple factors during the SaaS development lifecycle, all of which we cover below:
SaaS product development is complex, and many factors can influence the time and costs required to complete it.
Here are the common factors that can impact the overall cost of SaaS product development.
The complexity of your SaaS idea will have a significant impact on how much it’ll cost to develop. The more complex your product is, the longer it will take to build and test. This will lead to increased costs.
Many things can increase a SaaS product's complexity:
Based on the complexity, we can categorize SaaS products into micro, basic, average, and macro, with micro being the least and macro being the most complex. Based on this classification, you can expect to spend the following amount for your project:
Complexity - Cost
Micro - $20,000
Basic - $40,000
Average - $75,000
Macro - $200,000
The scope of a project is defined by the number of features and functionalities it offers. The more features you want your SaaS product to have and the more complex those features are, the more time and effort developers will require.
Generally speaking, you can expect to spend $300-$700 per feature.
While you can add many features to your SaaS product, you need to determine which ones add value to your target audience and add only those. Adding as many features as possible just for the sake of it might compromise the product’s User Experience (UX) and overall functionality.
Say you want to build a custom SaaS product for project management.
There are many features you can add to your app, such as task management, collaboration, reporting and analytics, and gamification, but that would significantly increase the cost of your SaaS product.
In such a case, you could simply get rid of some of the non-essential features that offer minimum value to users to reduce costs.
To make the process easier, try some feature prioritization strategies. Kano Model, Weighted Scoring, Story Mapping, and RICE Model are some of the most commonly used strategies for feature prioritization.
SaaS is a delivery model that allows users to access an application and its data from anywhere and at any time. So you can build any software with the SaaS model, and depending on the type, the cost of SaaS product development can change.
The table below represents some common custom software examples, how much they can cost, and examples of such SaaS solutions.
Type of SaaS product - Average Cost Range - Examples
Enterprise Resource Planning (ERP) - $120,000-$150,000 - Oracle NetSuite, SYSPRO, SAP Business One
Accounting - $70,000-$90,000 - Xero, Quickbooks, Freshbooks
Customer Relationship Management (CRM) - $50,000-$70,000 - Salesforce, ZohoDesk, Freshworks
Marketing Technology (MarTech) - $85,000-$110,000 - HubSpot, 6sense, ContentGrow
Email Marketing - $50,000-$65,000 - Mailchimp, ActiveCampaign, Drip
Project Management - $45,000-$65,000 - Trello, Basecamp, Monday
Visual Website Builder - $135,000-$150,000 - Weblium, Squarespace, Weebly
Delivery Software - $35,000-$50,000 - GetSwift, Bringg
Healthcare Systems - $160,000-$190,000 - Cerner, McKesson
Content Management System (CMS) - $100,000-$130,000 - BigCommerce, WordPress, Google Docs
eCommerce Software - $75,000-$90,000 - Shopify. BigCommerce, Adobe Commerce
You must also consider the platform you want to build for. For instance, will it be a web or a mobile app? Based on this, you must hire a development team, which can impact the cost.
For instance, if you want a SaaS mobile app, you must hire a mobile application development agency specializing in building software for mobile.
Technology stack refers to a collection of software components that work together to deliver your product.
For example, if you're building an eCommerce platform, your stack might include Ruby on Rails or JavaScript for the front end, Elasticsearch for search, and MySQL for data.
The technology stack you choose can greatly impact both development and maintenance costs. For example, you won't have to pay for their licenses if you use an open-source SaaS development framework like Angular, Node.js, Symfony, or Laravel.
On the other hand, using closed frameworks like Windows Winforms or Microsoft Foundation Class (MFC) Library will add to the overall cost of SaaS product development. For such frameworks, you might have to spend between $500-$1,500 or even more for license fees.
There are three types of development teams, in-house, freelance, and outsourcing agency. The type of development team you choose will impact the cost of SaaS product development.
Considering an average SaaS product development, here's how much you will spend with each type of team.
Type of Team - Average Cost
In-house team - $150,000
Freelance - $70,000
Outsourcing Agency - $95,000
We will discuss more each type of team and how they impact the cost of SaaS product development later in the article.
Location is a big factor in software development costs. The location of your team and even your server will influence how much you pay for SaaS development.
For instance, according to data from ZipRecruiter, the average hourly pay for software developer jobs in the USA is around $50. On the other hand, the average hourly pay for software developers in India is around 497 INR, equivalent to $6.
Below are some regions and the average cost for SaaS product development based on the location.
Location - Cost
Australia - $125,000
The USA - $200,000
The UK - $170,000
Western Europe - $110,000
Eastern Europe - $80,000
South Asia - $60,000
Skill level is a major factor in determining the cost of your project. The level of experience your team has can make or break your SaaS product development project.
Many factors are associated with the team's skill level, including:
A highly skilled team can deliver the project quickly but will require higher hourly pay. So it is best to build a team of mixed skills.
For example, suppose you need two front-end developers for your SaaS product. Instead of hiring two experienced employees, you can hire an enthusiastic and book-smart entry-level developer who can assist the more seasoned professional and even gain practical experience in the process.
If you only hire highly-skilled developers, you will have to spend at least double as wages. So the cost of SaaS product development can even exceed $200,000 in these cases.
Whether you have opted for a fixed-price or time and materials (T&M) contract will also drive the costs of SaaS product development. Here’s how:
To avoid overspending, it’s best to create a SaaS product roadmap before starting the project. A roadmap lists every task that needs to be completed and by when. This can give you a clear understanding of how long it will take for the entire development to complete, which can help you decide whether you should go for a fixed-price or T&M contract.
Each type of team, whether in-house, freelancers, or outsourcing, comes with its advantages and disadvantages. Let's explore how each developer team type and development phase can affect the cost of SaaS product development:
An in-house development team consists of employees that work for your company. They work exclusively on your projects and are fully integrated into your development and management style.
If you are an enterprise, in-house teams can offer numerous benefits in the long run. For example, you will get benefits like full control, complete dedication from developers, and knowledge retention.
However, this option is not for you if you are a startup with a limited budget. Hiring and training an in-house team for your project will be costly and time-consuming.
According to the U.S. News & World Report, the median annual salary of software developers in the US is around $120,730, which is over $10,000 a month. This means even a small team of just three developers will cost you over $30,000, and considering that building a successful SaaS product will take at least 2-3 months, you might be spending around $100,000 in just wages.
Freelance teams consist of independent professionals who work on a project-by-project basis. They are self-employed and typically work remotely, offering their expertise and services to multiple clients simultaneously.
Tapping into the freelance economy will allow you access to a diverse talent pool, as you will have the flexibility to hire them on a per-project basis. This makes them particularly suitable for short-term or specific-skill projects.
However, the biggest challenge of working with freelancers is reliability. There is a high chance that the freelancer may back out during the project, leaving with no other option than to hire someone else to finish their work.
Freelancers usually work on an hourly basis, which makes them a cost-effective option. Let's say you need Angular expertise. A freelancer can offer this service at around $35 per hour. So 40-hour work will cost you $1,400. On the other hand, hiring an employee for this will require you to pay a monthly salary of around $8,000-$12,000.
Frontend developers create user interfaces and design the visual elements of a website or application.
Typically, SaaS product development requires dedicating around 250 hours to front-end development. So considering a frontend developer charges an average hourly rate of $50, the total frontend development will cost you $12,500.
A backend developer primarily focuses on building and maintaining a software solution's server-side logic and infrastructure. They work behind the scenes to ensure the smooth functioning of an application, handling tasks such as data storage, security, and communication between the server and the client.
Backend development usually takes 550 hours, and an average of $50 an hour will cost you $27,500.
Quality assurance is crucial for ensuring the long-term success of your SaaS product. You might feel that you don't have to test the application again and again as there are no complaints from the customers.
However, bugs can always ruin the functionality of a perfectly functioning code.
So you will want to do thorough testing before launching your SaaS product in the market. You must dedicate around 100 hours to quality assurance. With an average salary of $50, you will spend $5,000 on quality assurance.
Considering all three development phases, the overall cost of SaaS product development will likely amount to $45,000 for a basic application.
Outsourcing agencies are third-party companies that specialize in providing development services. They have teams of professionals who work on client projects.
Development agencies can offer you the best of hiring an in-house team and a freelancer. For instance, you will get the expertise of an in-house team without having to spend a lot on monthly salaries. At the same time, development agencies are much more reliable than freelancers, because their professional reputation is on the line.
Moreover, you won't have to micromanage the entire development process, as the best software development agency will have several years of expertise and the necessary knowledge to manage everything independently.
But, at the same time, this does not mean you will be out of the loop. You can always ask for updates about the SaaS product development from the team working on your project.
As for the costs, outsourcing your SaaS project will cost you something between the cost of paying freelancers and having an in-house team. You can expect to spend 1.5 times what you would be paying freelancers.
This can amount to $35,000 for a basic SaaS product.
Now that you know about the different types of development teams and how they impact the cost of SaaS product development, let's explore what the best option is and in what situation.
While the cost of SaaS product development should be your primary concern when it comes to budgeting, there are other factors you must consider, too.
Listed below are some other costs associated with SaaS product development:
External services are services provided by third parties. Examples of external services include payment processing, cloud hosting services, Application Programming Integration (API), and marketing automation.
For example, suppose you are building a SaaS-based eCommerce platform. In this case, you will need a third-party payment processing gateway for all online transactions. The service provider you choose for facilitating these payments will require some fees for each transaction. You can consider these as the fees for using external services.
The cost of these services will vary depending on your needs, but overall they can increase the spending by $1,000.
Servers are vital for your SaaS application development in that they host and store data, including website data, customer information, product catalogs, financial records, etc.
This data is typically at the core of SaaS success. Without ample data, your SaaS solution cannot deliver the quality services that can attract customers.
Let’s consider a hypothetical SaaS application called "SalesBoost" which provides business sales management and analytics tools. The success of SalesBoost depends heavily on the data it collects and analyzes from its users.
SalesBoost collects and stores various data types, such as customer information, sales transactions, product inventory, and marketing campaign performance. With this data, SalesBoost can provide valuable insights and recommendations to its users, helping them optimize their sales strategies, improve customer targeting, and increase revenue.
Without ample data, SalesBoost would struggle to deliver its users accurate forecasts, personalized recommendations, and comprehensive insights. The application's value proposition would diminish, and customers may not find it compelling enough to use or continue subscribing to the service.
Maintenance is the ongoing cost of keeping your software up to date and running smoothly. This includes support, updates, bug fixes, and any other maintenance tasks that must be done regularly.
Maintenance costs are increasing with every passing year. A press release from BusinessWire shows that the software maintenance market is expected to grow at a compound annual growth rate (CAGR) of 8.51%.
The frequency and cost of maintenance will depend on your business needs and the type of software you use. For example, if you're using a SaaS application for invoicing or Customer Relationship Management, these costs will be lower than if you were using an Enterprise Resource Planning system like SAP which requires more frequent upgrades.
Based on the number of users, type of software, license fees, frequency of updates, etc., SaaS product maintenance costs can range from $1,500 to $5,000 a month.
Design is a critical part of the software development process. Both user interface (UI) and user experience (UX) can greatly engage users and attract more customers to your SaaS solution.
To begin with, the app needs to be visually appealing, so you will have to hire app design experts. You can expect to pay $30-$45 an hour for UI services.
However, it's not just about how it looks but also about how easy it is to use. That’s why design involves thinking also about flexibility, usability, and functionality.
For example, consider a task management app with a visually appealing interface that uses a clean and intuitive design. The app could have a visually pleasing color scheme, clear typography, and well-organized task cards. This is the UI part of the application.
UX, on the other hand, goes beyond just the visual aspects and focuses on how users interact with the app. In the case of the task management app, an excellent user experience would involve providing features that enhance productivity and usability. For instance, the app could allow users to easily create and organize tasks, set due dates, assign priorities, and collaborate with team members.
The number of cybersecurity breaches is increasing rapidly. According to data from Techjury, around 64% of companies worldwide have faced at least one form of cyberattack. That makes security another important aspect of software development. It is also one of the most overlooked aspects when calculating costs.
The cost of security varies depending on your size and industry, but you must budget for this extra expense when planning your SaaS development budget.
Security costs include:
Let's understand the cost of SaaS product development through some examples that list the SaaS product's core features and approximate costs to build similar solutions.
Salesforce is a leading CRM platform that offers a wide range of tools and features to manage sales, marketing, customer service, and more. It helps businesses streamline processes, improve customer relationships, and drive sales growth. Over 150,000 customers across different industries use Salesforce CRM, making it the largest market share holder at 23%.
Key features:
Building a CRM SaaS product similar to Salesforce can cost you anywhere between $100,000 - $150,000, depending on the scope and complexity of the project.
Slack is a popular team collaboration platform enabling seamless organizational communication and collaboration. It provides a centralized hub for team messaging, file sharing, and integrations with various third-party applications.
Key features
The cost would depend on factors such as the complexity of the user interface, the number of integrations required, and the scale of the platform. It can range from $85,000 - $100,000
Trello is a popular project management and collaboration tool that uses a visual board-based system to help teams organize and track their work. It provides a simple and intuitive interface where users can create boards, lists, and cards to represent tasks and workflows.
Key features
The cost of SaaS product development for a project management app like Trello can cost you between $50,000 - $70,000
Do you still have some questions on SaaS product development? Check out the answers to the most frequently asked questions below:
The development time for a SaaS product can vary depending on several factors, including the software's complexity, the development team's size, and the project's specific requirements. Generally, it can take anywhere from four to eight months to develop a SaaS product solution.
Ensuring the security of your SaaS product is vital to protect user data and maintain trust. Here are some essential steps to enhance the security of your SaaS product:
You can minimize the cost of your SaaS product by developing a minimum viable product (MVP).
This is a development strategy and product management concept focusing on creating a basic product version with minimal features and releasing it for early users.
This strategy increases development speed, accelerates the time to market, and reduces the costs associated with additional features, hourly wages, and maintenance. The MVP costs usually amount to half the cost of SaaS product development.
Understanding the cost of SaaS product development in 2023 is crucial for businesses looking to embark on this journey.
By delving into the various factors that influence development costs, such as project complexity, technology stack, team size, and development timeframes, you can gain a clearer picture of what to expect.
MakeITSimple can help you navigate through the cost considerations. Our expert developers are well-versed in building SaaS products and can provide valuable insights and guidance tailored to your unique requirements.
Contact our experts today to start building your custom software solution.
If you are looking for a bespoke software development company, please get in touch by phone by calling +44 (0) 1905 700 050 or filling out the form below.
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