How Much Does It Cost to Develop a SaaS in 2023? Cost Breakdown
Are you a startup founder, head of product, or serial entrepreneur that’s curious about the cost of developing a SaaS platform?
If yes, then keep reading to educate yourself on the following:
- The cost of developing a SaaS solution,
- Factors influencing the cost of SaaS app development,
- The hidden costs attached to developing a SaaS solution,
- Examples of SaaS solutions, and their requisite cost.
Now that you have a concise idea of what we’ll discuss, let’s initiate the discussion with an exposé on the cost of developing a SaaS solution.
If you prefer visuals to text, go straight to the “SaaS development cost” bonus infographic.
How Much Does It Cost to Develop a SaaS Application?
The cost of developing a minimum viable product for a Software-as-a-Service startup should typically range from $60,000 to $150,000.
However, other factors determine the exact cost, among which include:
- The complexity of the solution,
- The type of product,
- The type of team involved,
- The location of the developmental team.
Let’s consider each of them separately for deep insight into the intricacies of each.
Cost Defined By the Complexity of the SaaS
SaaS platform complexity is a term to describe the set of functionalities, user roles, and how they relate to each other in your application.
You can also describe them as the level of difficulty a developer faces while building the SaaS.
For example, SaaS products designed for the healthcare domain with multiple integrations and functionalities have a higher complexity than one with a single feature, performing a basic task.
However, there are SaaS platforms with a single purpose but are highly complex; two examples of these are Mailchimp and Grammarly:
- Grammarly has a basic feature (text editing); however, at the backend are AI algorithms and big data analysis working to help the software achieve its aim.
- Mailchimp, although it primarily sends emails, has multiple sophisticated activities making this achievable, e.g., email constructors and triggers.
While the term “complexity” is quite relative, we can categorize them into micro, basic, average, and complex for better understanding.
As you might have imagined, the more the complexity of a SaaS platform, the more the time needed to be expended in its development; this will, in turn, affect its cost.
Let’s help you with a spreadsheet of the estimated cost implication based on complexity:
|Complexity||Average price, $|
The price stated above is not definite, as some hidden costs might pop up along with the cause of development. E.g., the cost of purchasing a domain name, integrating with APIs, etc.
Another defining cost factor is the product type. Let’s help you understand this in detail.
Cost Defined by the Type of SaaS Solution
Another important factor that influences the cost of SaaS solutions is the type of software.
Some SaaS projects are very difficult to build, mainly due to the level of new features that should be inherent in them and the sensitivity of the data being handled.
Take, for example, accounting software.
It requires state-of-the-art data protection technologies to prevent sensitive financial information from leaking.
This singular feature increases the price of the site:
|Type of SaaS||The average cost for an MVP, $||Example|
|Accounting||80,000||Xero and Quickbooks|
|Visual website builder||150,000||Weblium|
Cost Defined by Type of Team
Let’s dissect how the type of development team you opt for may affect the cost of SaaS development.
Let’s assume that you’re building a software-as-a-service platform with average complexity for illustrative purposes.
|Type of Team||Average cost, $|
|In-house, the US||140,000|
|The local development company, the US||180,000|
Does each kind of team in the spreadsheet seem confusing? Let’s help you have a better understanding of what they entail.
Type 1. In-House Team
This hiring model entails employing a team of developers to work within your startup’s environment.
These developers take orders directly from the company’s administrators and report daily to superiors within your startup.
Before you decide on choosing this option or not, you should first educate yourself on its pros and cons:
| || |
An alternative to this option is hiring a local development company. Let’s discuss the nitty-gritty of this.
Type 2. Local Development Company
This option can be pricey for startups domiciled in the UK, USA, Canada, and other high-income nations.
We’ll consider its pros and cons to understand your option better.
| || |
The cons of hiring a local development team are too significant for most startups to bear. As such, we’ll discuss another alternative – hiring freelancers.
Type 3. Freelancers
Freelancers are independent SaaS developers with experience in several tech stacks requisite for developing a fully-functional Software-as-a-Service platform.
These individuals are not committed to working for any organization but only focus on getting contracts from numerous clients and executing them as occasion demands.
Just like other options on this list, they also have their pros and cons to consider.
| || |
The last and arguably the best option to consider is an outsourced team. What does this entail?
Type 4. Outsourced Team
Opting for an offshore outsourced team is a trendy pattern for startups based in high-income nations.
The crux of this model centers around seeking a SaaS development team in a nation different from the startup’s country of residence.
For example, a US-based startup hiring a software development agency domiciled in Ukraine to help build a SaaS solution.
This option offers lots of advantages, with only a few cons that can be worked around:
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Another cost influencing factor for Software-as-a-Service projects is the team’s location. Let’s delve into this a bit.
Cost Defined by Team Location
The country where your team is domiciled is a huge factor in influencing the cost of Software-as-a-Service development.
Say, for example, a typical SaaS business solution that costs $180,000 in the United States will cost $60,000 in Ukraine.
Below is a spreadsheet depicting the cost of developing your solution in some countries.
|Country||Average cost, $|
We analyzed the most significant factors in the pricing of SaaS development.
Now let’s look at some examples.
Description of Development Costs by Example of 3 SaaS Companies
To better understand the cost of owning your Software-as-a-Service platform, we’ll use three examples as case studies.
Case Study 1: The Cost of Developing a SaaS like Slack
Slack is a communication platform where individuals can hold workplace-related conversations.
The core features of Slack
- In-app and email notifications
- Text, voice and video calls
- Channel privatization
- Apps integration (this feature helps it connect with other services )
- Instant messaging
- Messaging channels
Albeit founded in 2013, the company’s usage metrics show that it currently has over 10 million daily active users. This is a high figure for a barely a decade-old company.
Case Study 2: The Cost of Developing a SaaS like MailChimp
Mailchimp is an all-encompassing marketing platform that aims to sharpen online marketing practices effectively.
The platform empowers millions of customers to start, grow, and market their businesses through this use of advanced marketing technology.
According to the BusinessWire, albeit founded in 2001, the company has 13 million users. Of that number, 2.4 million of them are monthly active users, while 800,000 are paid, customers.
The key features of Mailchimp
- Custom forms
- Email automation
- A/B testing
- Email pipelines
- Email segmentation
Mailchimp is a platform with multiple complex features. So we will consider the case when you’d like to develop a new email marketing solution.
The development cost of such an MVP will be around $80,000 – $100,000.
Case 3: Cost of Developing a SaaS like Pipedrive
Pipedrive is a CRM platform tailored specifically to help users visualize their sales processes and maximize their leads.
The platform is inspired by the sales experience of its founders and was inspired to create a solution that eases sales processes.
Statistics from the customer relationship management company suggest that the platform has over 50,000 paying customers spread across 140 countries.
Key Features of Pipedrive
- Salesforce automation
- Marketing automation
- Reporting & analytics
- Customer support
- Social media integration
As in the case study above, let’s imagine, that you’d like to develop a new CRM. The cost of such an MVP will start at $60,000.
Now that you have an idea of the cost implication of developing a software-as-a-service, let’s take a dig at some SaaS-specific cost-influencing factors.
Factors Affecting the Development Cost of SaaS
Let’s discuss how software development teams calculate the cost of building a Software-as-a-Service application.
Factor 1: Business Logic of the SaaS Product
The business logic is a compendium of the overall workings of the app, the purpose of creating the solution, and the outcomes users get from using the platform.
It is the basis for determining how a product functions and what features are obtainable on it.
The business logic determines the following attributes:
- The complexity of the solution,
- The tech stack to use on frontend and backend,
- The number of external integrations,
- The number of team members,
- The size of the application, etc.
For example, you’d like to develop a new EHR. If you’ll copy existing competitors, the development can cost up to $300,000.
But if you’ll start with a limited set of features, and then scale the solution, it will help to save an MVP development budget.
Let’s discuss another SaaS-specific cost influencing factor to note.
Factor 2: The Technological Architecture of the Product
The technological architecture of a SaaS product entails the arrangement and interaction of entities according to the business and technical requirements.
Attributes within the technological architecture that determines the app development process and cost are:
- Number of API integrations,
- Scalability, and more.
In other words, the more complex your idea, the more integration and effort engineers will need to implement it. It is clear that the price of SaaS development will increase accordingly.
Another factor affecting the cost of developing a Software-as-a-Service is the UX/UI design. Let’s discuss that in detail.
Factor 3: The UX/UI of the Product
User Experience and User Interface design determine all actionable features, functionalities, and pages that the application will have.
Thus directly influencing both the developmental activities and business logic involved in development.
Their designs serve as a guide, with which the developers know what functionality to create and the expected delivery of the founder.
A complex SaaS UX/UI design will make the design process more cumbersome for the front-end developer and increase the cost of building the app.
Now that you know the factors that affect the cost of developing a SaaS product, let’s discuss a bit some hidden costs that most founders and startups ignore.
The Hidden Costs of SaaS Application Development
These are costs that aren’t glaring to founders in the early face of the project.
However, those costs are salient to your application’s existence and are intrinsic to ensuring they reach their target audience.
The two more prominent SaaS product development hidden costs must be added to your total cost of ownership:
- Maintenance cost
- Marketing cost
Let’s discuss what each entails in detail.
Hidden Cost 1: Maintenance
Usually, support is about 25% of the software development cost. If the cost of developing your software-as-a-service is $100,000, then your maintenance cost can be as high as $25,000 per year.
What makes SaaS maintenance costs this exorbitant is the diversity of aspects involved. Your maintenance cost will include spending on
- Domain name
- SSL certificate
- Email services
- Premium technical support
This cost is necessary to keep your platform running and provide a quick fix if an error occurs.
Hidden Cost 2: Marketing
Startup marketing is an important aspect of growing your user base and ensuring corporate goals are attained.
For a Software-as-a-Service, an ideal marketing cost should typically range between x2 – x3 of the development costs.
If your development cost is $100,000, then be ready to spend not less than $200,000 – $300,000 annually on marketing your product.
The annual cost of marketing is this high because of multiple financially demanding aspects that include:
- Information architecture,
- Technical, on-site, and off-site SEO,
- Email marketing,
- Product Hunt launches,
- PR and social media marketing, and more
Part of the money is also the overhead cost for the marketing team.
Now that you know the cost of creating a captivating and highly demanding Software-as-a-Service solution, let’s help you get started.
Interested in Developing a Software-as-a-Service?
At Spdload, we can help you design, develop, and deliver your solution in less than a year. We have a team of 70 professionals with over 5 years of experience in creating a diverse range of solutions.
Here is a summary of our in-depth guide. Learn the basics about how much it costs to develop a SaaS application from scratch.