Cost factors in SaaS development [Breakdown 2024 + Case Study]

When considering SaaS development costs, it’s essential to understand the factors that influence pricing. The cost of building a SaaS application can vary significantly, depending on the complexity of features, the technology stack, and the geographical location of the development team. A key cost factor is whether you fund an in-house team or opt for near-shoring.

In this article, we will explore the key costs of developing a SaaS platform, providing a detailed analysis to help you estimate your project’s budget more accurately and actually see how much software as a service costs. Additionally, we’ll include a case study to illustrate how these factors come into play in a real-world scenario.

When talking about SaaS startup costs, understanding the various factors that influence pricing is key if your business is considering building a software-as-a-service product. 

The cost of developing a SaaS application

This can vary widely, starting from the complexity of features to the technology stack you choose and also the geographical location of the development team, as one aspect that holds weight when we’re talking about costs is funding an in-house team vs. near-shoring a team.

What influences the cost of developing a SaaS platform?

Now, if you’re reading this, you might have weighed the good, the bad, and the ugly of developing a software-as-a-service product and decided to gather information on the costs and timeline of your project. 

Well, the total cost of a SaaS platform can go anywhere from 45,000€ to 150,000€ and even more, depending on multiple factors related to software as a service development that have a higher or lower impact on the price of your application. 

Let’s go through the most impactful factors:

• A basic SaaS MVP (minimum viable product) will often run you back anything from 45,000€ to 100,000€. However, you can be looking at a bill upwards of 250,000€ if you want a more sophisticated and unusual application. 
• Going hand in hand with the goal of your app, the complexity of the features is also rather crucial. Your budget will be impacted whether you are seeking a basic suite of features or if you have ideas for original and specialized features for your consumers.
• Now, you might want to throw in some APIs (application programming interfaces), the so-called digital bridges allowing several programs to connect with one another. The cost rises with increasing integration count.
• Choosing open-source, widely used tech stacks may help you save costs; yet, if your SaaS platform development calls for specialized or innovative solutions, the expenditures will grow noticeably.
• Tight deadlines might call for a larger development team or more hours worked, which would raise costs. 
• Not overlook the continuous expenses, including maintenance, upgrades, and client support. These can add an extra 20–30% to your annual budget; hence, while designing your SaaS application development path, keep those in mind.

Hiring in-house developers vs. outsourcing to software development agencies

If you want to outsource your SaaS app development team, we highly recommend looking for partners in Eastern Europe. Take Romania, for instance; it’s fast becoming a hotspot for SaaS software development.

Why? Well, you get a fantastic mix of top-notch technical skills, cost efficiency, and cultural compatibility, meaning you can develop a SaaS application with high quality without breaking the bank.

Plus, the time zone overlap with Western Europe makes collaboration smooth and efficient. 

So, if you’re looking to cut down on SaaS development costs while still capitalizing on top talent, a Romanian SaaS development company is definitely worth considering. 

Check out more about the benefits of outsourcing in Romania.

When to hire in-house developers + product manager

If you’re building a complex, custom SaaS application that requires ongoing iterations and maintenance, bringing in an in-house team can be more expensive than outsourcing, as you have to offer training, paid leave, and benefits—but, at the same time, it provides greater control over the development process, allowing you to fine-tune your SaaS platform development and adapt quickly to market changes.

Additionally, having an in-house product manager ensures that your SaaS MVP aligns with business goals and customer needs from the start, reducing the total cost of ownership over time.

Here’s a cost breakdown for building a cross-functional team in the UK market. Keep in mind that these figures are approximate and may vary depending on the experience level of the team members, the specific location within the UK, and the size of the company. 

1. Salaries

• Product Manager:
  • Annual Salary: £60,000-£90,000
  • Total Cost (including taxes/benefits): £75,000-£12,500
• Senior Software Developer:
  • Annual Salary: £50,000-£75,000
  • Total Cost (including taxes and benefits): £62,500-£93,750
• Mid-Level Software Developer (x2):
  • Annual Salary: £40,000-£60,000
  • Total Cost (including taxes/benefits): £50,000-£75,000 each
  • Total for 2 Developers: £100,000 – £150,000
• Junior Developer (x1):
  • Annual Salary: £30,000-£40,000
  • Total Cost (including taxes/benefits): £37,500-£50,000
• QA Engineer:
  • Annual Salary: £35,000-£50,000
  • Total Cost (including taxes/benefits): £43,750-£62,500

2. Overhead costs

• Office Space: £15,000-£250,000/year (depending on location and size)
• Software and Tools: £5,000-£10,000/year (licenses, development tools, etc.)
• Recruitment Costs: £20,000-£30,000/year (recruitment agencies, job ads, etc.)
• Training and Development: £5,000-£10,000/year (conferences, workshops, etc.)
• Utilities, office supplies, etc.: £5,000-£10,000/year

3. Total Annual Cost

• Low-End Estimate: £368,750
• High-End Estimate: £560,000

These costs will reflect on the pricing model of your choice once you launch your platform. Be sure to check out these SaaS enterprise pricing models to see which is the best fit for your user base!

UX design for better SaaS solutions 

We highly recommend allocating an additional $8,000 to $15,000 (depending on your project’s size and complexity) to your SaaS development budget specifically for hiring a UI/UX designer who specializes in SaaS product design.

While planning a user flow and allowing you to see your whole SaaS app before development starts, a professional designer should create stunning layouts for every page of your app.

This strategy not only improves your vision for developers, hence perhaps lowering development expenses, but it also greatly helps your project to be successful.

Usually costing the amount of screens (or pages) your platform needs, UI/UX design runs between $250 and $1,000 per page.

When to hire software development companies 

If you aren’t experienced in managing a SaaS development team and project, hiring a software development company will save you from many headaches and set you up for success.

The main benefits of hiring software development companies and outsourcing your development process are: 

• Cost savings: companies opt for offshore software development services to cut costs. Collaborating with teams in low-labor-cost countries means notable services at wallet-friendly rates.

• Global talent access: offshore teams bring diverse skills to the table. Companies benefit from specialized expertise and a rich blend of experiences.

• Time zone advantage: Sure, 24/7 availability sounds cool, but time zones can be a hitch. It’s a plus for round-the-clock resources, but coordinating across zones can be a challenge.

Read more about the benefits of offshore development teams here.

How to choose your SaaS development partner 

Picking the perfect partner for your SaaS app development can make all the difference. Our advice is to first look for someone with a solid track record in SaaS software development. Check out their website, dive into their case studies, client reviews, and portfolio. These will help you decide whether or not you would consider working with a specific team.

But it’s not all just about having technical knowledge. SaaS development demands a dedicated team with diverse skills. Look for partners with a well-structured team—think project managers, designers, developers, architects, QA engineers, and more. This will ensure you’ll get qualitative services, as every single member is specialized in their area.

Now, let’s talk about methodology. Agile and DevOps are the way to go for efficient software delivery without compromising on your SaaS application quality or your budget. Partners who use these kinds of methodologies can streamline processes and adapt quickly to any changes. It’s all about being efficient.

Don’t forget to ask the right questions.  Clarify who will own the source code; you want to make sure you have some clear agreements in place. And, of course, discuss the post-deployment support they offer. A successful SaaS application needs continuous support, so ensure your partner is ready to provide the technical support you’ll need after launch.

Lastly, consider starting with a Minimum Viable Product (MVP). It’s a great way to validate your SaaS concept before diving into full-scale development. This approach can save you time and money and help you tailor your product based on real user feedback. 

Let’s build something great together. Get in touch with us!

Hidden SaaS development costs people don’t talk about

How much does SaaS cost?

#1: Running Costs

Starting a SaaS firm makes it natural to concentrate just on the first SaaS development expenses. But it’s also important to set aside money for ongoing costs that impact SaaS’s whole cost of ownership.

Initially, especially considering a limited user base, server expenses will be low. As your SaaS platform expands, expect these expenses to rise. Usually, server expenses at launch fall between $30 and $50 a month. These expenses might be more for SaaS goods like file management software that call for large amounts of data storage.

Many SaaS apps improve functionality by depending on outside services. Additional fees accompanying services include Agora for video conversations, Intercom for customer support, and Auth0 for login management. Along with the first SaaS app development expenses, be sure to factor these in. Your SaaS pricing schemes should ideally cover these running expenses.

#2: New Features

Adding new features all the time is necessary to keep people interested and stay ahead of the competition. As part of their software as a service development experience, users anticipate consistent upgrades and enhancements.

By using a detailed feature roadmap, you may effectively estimate the SaaS development cost and design for future improvements. Make sure your budget covers required feature enhancements and security upgrades for these advancements. Your SaaS solution should ideally bring enough income to enable continuous feature development and maintenance.

How we transitioned from an on-premises to a SaaS solution

Case Study: DTangle’s Transition to a SaaS Platform

One of our proudest projects is DTangle’s Transition to a SaaS Platform. To get you on board, DTangle is a Swiss startup based in Geneva, specializing in complex graph data processing software. Established in late 2023, DTangle evolved from CSX, an open-source project at CERN. With over 30 years of collective experience, DTangle aims to rewrite the way you do see data and AI interactions, leveraging its scientific heritage to drive business excellence and societal impact.

Project timeline and key outcomes

• Business Analysis & Prototyping: 3 months
• Full Product Development & Team Building: 2 years

Key Outcomes:

• Transformed complex technology into a viable SaaS product concept.
• Developed a Figma prototype to visualize core functionality.
• Facilitated workshops to refine the SaaS MVP and attract investors.
• Supported project initiation and team ramp-up using a structured software development life cycle (SDLC).

The Challenge

DTangle’s transition from an on-premise solution to a SaaS application required:

• Integrating Vision with SDLC: Translating an ambitious vision into a concrete SaaS product, incorporating detailed specifications and development life cycle models.
• Capturing User Needs: conducting extensive market research to address the needs of data analysts, researchers, and business professionals.
• Ensuring technical feasibility: incorporating advanced data processing and AI within a user-friendly interface.
• Security and Compliance: Building robust security measures and adhering to data protection laws.
• User Experience: Designing an intuitive user interface that caters to both novice and expert users.
• Real-Time Collaboration: Implementing effective data synchronization and user role management.
• Scalability: ensuring the platform can adapt to future technological advancements and market needs.
• Education and Support: Developing comprehensive training materials and support systems for user adoption.

Approach and Solution

1. Frequent Communication:
   • Daily and weekly meetings ensured alignment between the development team and DTangle.
2. In-Person Collaboration:
   • On-site sessions in Switzerland refined development strategies and explored potential product uses.
3. Prototyping and Refinement:
   • Conducted a detailed business analysis and created a Figma prototype to visualize and refine the SaaS platform.
4. Market Strategy:
   • Developed monetisation and market strategies, aligning product architecture with business goals and SaaS pricing plans.
5. Sales and marketing insights:
   • Engaged specialists to define user personas and tailor the product for the market.
6. Comprehensive Business Analysis:
   • Generated actionable plans from insights, shaping the SaaS application development path.
7. Feature Roadmap:
   • Incorporated essential features such as user authentication, data management, visualization tools, and security measures.

Benefits and Impact

• Secured financing: DTangle obtained investment to advance development.
• Clear development needs: achieved a well-defined vision for the product.
• Reduced development costs: streamlined planning minimized the cost of developing a SaaS platform.
• Effective Pitching: Enhanced ability to present the product concept to investors.

Cost Breakdown

• Initial Software Development: Approximately €425,000, covering core functionalities and advanced features. Here’s a brief overview of the key functionalities that have been developed firsthand as we render the transition from on-premise to SaaS. In this part, the software development involves an interactive demo of the CSX DEMO. It covers data management, validation, visualization, and error handling. Additionally, it provides a range of powerful features such as advanced data query functionality, intuitive tools for data models, network graph representation, dynamic workflow state creation, data filtering, and seamless integration of various chart types. This application provides a range of features to enhance any data analysis experience. Everyone can easily visualize multiple datasets, export data, generate reports, and monitor system performance with real-time dashboards and automated alerts. 

• Additional SaaS Transition Costs: Includes elements like user authentication, API integration, real-time data handling, and compliance measures.

DTangle’s journey from a traditional software solution to a SaaS platform underscores the importance of thorough SaaS development.

By effectively managing SaaS costs and leveraging expert SaaS development companies, DTangle achieved successful product launch and operational efficiency, illustrating the benefits of transitioning to a SaaS model.