The software as a service (SaaS) market’s revenue is anticipated to reach $212.2 billion in 2022 and increase 9.1% annually over the following five years. Since 2015, the average number of SaaS applications utilized by businesses worldwide has increased. Consumer SaaS, such as Adobe Creative Cloud, Netflix, Figma, and Zoom, is steadily occupying more and more of our daily digital lives.
The prospect of developing SaaS software may be sufficiently inspired by these trends alone. You can successfully launch a new-level product if you combine them with practically limitless scalability, subscription-based revenue, and low cost of distribution made possible by the cloud.
Different tech startup founders focus on different software types, industries, and audiences, but all of them have one thing in common — the desire to build a successful product. In a startup environment, “success” usually means the following:
- Attracting new customers and scaling a product fast
- Creating a predictable and growing revenue stream
- Reducing expenses
While cloud hosting isn’t a magic wand that makes every product a market winner, choosing a SaaS scenario can greatly improve your chances of success. There is a handful of reasons for that.
Consumerization of enterprise software
Enterprise software has long been synonymous with platform dependency, poor performance, and clunky user interfaces. But expectations and demands of B2B customers are in constant flux. People get the best-in-class experience when using consumer apps — why should they tolerate the flaws of corporate software?
Consumerization of enterprise software puts a B2B user at the center of the workplace digital experience. Employees expect intuitive, fast, and agile tools, so corporate decision-makers are looking for software that meets these criteria. As a result, enterprise IT ecosystems are shifting from on-premise to SaaS since, in most cases, only cloud-based solutions ensure consumer-grade UX.
For startups targeting corporate clients, it means that SaaS enterprise products are more likely to meet the current demand of potential users. Ultimately, this leads to higher sales and revenues.
Subscription-based payment model
SaaS products enable a subscription-based payment model. For you as a startup founder, it translates into faster customer acquisitions. Unlike with traditional software, users of SaaS tools don’t have to sign multi-year contracts with a vendor and pay high up-front fees — without any guarantee of good performance or support.
Instead, they can start small by opting for a basic package, get instant access to a service, and pay for it on a pay-as-you-go basis. Also, users can unsubscribe from a service at any time. They don’t risk losing much money, and all of it, taken together, makes SaaS products an attractive purchase.
On top of that, if you build a SaaS solution based on a multi-tenant architecture, the cost of setting up a new user will be relatively low. So, you’ll be able to attract new customers with a trial or a freemium model.
Low entry barrier
A SaaS product is relatively easy to build, maintain, scale, and distribute. All you need is your brilliant idea and a team of professionals with expertise in cloud development services, for example, in AWS web app development. “How come?” you might wonder.
When you follow a SaaS approach, your product is stored on the cloud vendor’s servers. You don’t need to worry about hardware, its purchase, and maintenance. Also, the most popular cloud vendors offer an entire ecosystem of tools for building a wide variety of solutions, from e-commerce to ERPs. So, the development process speeds up. Finally, sales get streamlined since there is no need for physical distribution — usually, users get access to services in a few clicks.
A subscription-based payment model allows you to create a stable and predictable revenue stream. Traditional software is usually sold like physical goods — customers make up-front payments and then use a product for a period a vendor can hardly control. With SaaS solutions, a user is charged monthly or annually, while a vendor sets the pricing policy and can monitor for how long a particular customer uses a product.
A subscription-based model is beneficial for both sides. Customers don’t need to pay a lump sum in advance for a product that might not fit their needs. Meanwhile, you as a product seller can change prices, get high profit margins, and attract new users using digital marketing techniques.
Innovation and agility
Building an app on AWS, a current market leader or its less popular alternatives empowers innovation and agility unheard of for an on-premise setup. In the SaaS scenario, it’s much easier to keep your product relevant and accommodate it to new market conditions. You can roll out new features quickly, too, as the product is hosted centrally and has only one configuration.
SaaS startups have been garnering much attention from investors, including VC funds. According to PitchBook Data, this IT area got the highest funding ($3.62 trillion) from 2013 to 2021. And it’s no wonder. A SaaS business model is a road to regular revenue, customer satisfaction, and fast growth. Combined with the fast adoption pace, all these aspects make SaaS solutions an attractive find for investors.
Read Also: How do You Grow SaaS Sales?
Tech startups are trying to disrupt business-as-usual with their innovative apps — something never offered before. But while all the products built by startups are unique, their development processes are similar. They usually include the following key phases:
- Doing market research and shaping an idea
- Hiring a development team
- Deciding on app features and architecture
- Choosing a tech stack
- Developing a PoC
- Developing an MVP
- Testing a product
- Launching an app and further iterations
AWS app development is based on similar logic. But to detail a journey to SaaS, Amazon experts created four frameworks, each targeting a different company profile. One of them, UnicornExpress.com, is designed specifically for businesses that want to create an AWS-based solution from scratch. Here are the stages it outlines.
Startups build unique and innovative products, so there is neither an existing market for them nor an established target audience. The first stage of the UnicornExpress.com framework focuses on creating the fundamental projections for all core aspects of a startup’s business model. This includes accessing the opportunities, identifying the target segments, developing a business concept, deciding on a monetization model, and evaluating the required resources.
Product strategy and roadmap development
At this point, startups have to dive deeper into defining the product strategy and how it matches customer needs and wants. While founders may be tempted to proceed right to the product creation, AWS experts insist that this stage is crucial for future business growth. Without a well-thought strategy, it can be hard to meet market demand in the long-term perspective.
During this stage, you need to develop a user persona and gather customer data to get insights into their expectations. Then you design an onboarding experience, identify legal and security requirements applicable to your product, and decide on pricing.
Minimum viable service (MVS)
The third phase of AWS app development allows startups to accelerate time to market and test key assumptions about their product. That’s when you should think about the first version of your app: what functionality to include, who the early adopters will be, how to gather customer feedback, etc. In addition, you need to lay out core SaaS principles for your MVS. Decide what goals you want to achieve within this iteration and what compromises you’re making at this point.
At this stage, startups have to focus on their go-to-market (GTM) strategy. Usually, most of the core activities are related to marketing and sales. They include customer acquisition and retention, in-product communication, knowledge management tools, and expansion-selling initiatives. Here a startup must update customer journey maps, establish frameworks for new customer acquisition, set customer retention and growth objectives, and develop marketing campaigns.
What Makes a SaaS Application Modern?
A modern SaaS app is much more than a bunch of cool features. To fit customer needs, it has to meet a range of critical non-functional requirements, too. Modern architectural patterns, operational models, and software delivery processes create a foundation for modern SaaS applications. When these aspects are properly implemented, you’ll get a product that:
- Scales up and down as necessary. Market conditions are changing all the time, and your product should do so, too. Whatever strategy you choose, be it rapid growth to millions of users or targeting a niche audience, a modern SaaS app must allow for easy adaptations.
- Has a global availability. A modern SaaS app is platform-agnostic. Users should be able to access it anytime, from any device and any location in the world with internet coverage
- Can manage petabytes of data. No matter what audience you target — enterprises or individual users — they’ll likely generate tons of data daily. A modern SaaS product should be able to handle it effectively, taking care of integrity and security.
- Responds in milliseconds. Modern SaaS products are fast. They should respond instantly to user inputs and provide real-time access to information. No one will use a web app that performs poorly.
Modern SaaS software development allows startups to innovate and adjust their business strategy to the changing circumstances while keeping costs relatively low. These are four main reasons to choose the cloud-based approach when creating a new product:
- Increased agility. In SaaS development, there’s no hardware you have to take care of. Developers can focus on innovation, updates, and product enhancements instead of wasting time on maintenance.
- Developer efficiency. SaaS products are based on a microservice architectural approach. It speeds up the time to market and lets you release new features quickly. If you apply the right approaches and create the right design, there will be little to no risk of application failure.
- Reduced total cost of ownership (TCO). With a SaaS product, there is no operational maintenance and overhead. As a startup founder, you get a reduced product TCO.
- Improved ROI. App development on AWS or its alternatives allows product creators to get higher ROI compared to on-premise scenarios. For example, such services as AWS Lambda and AWS Fargate help users avoid over- or underutilization of cloud resources. They automatically resize storage volumes based on changes in development needs and workload.
Before you proceed with SaaS development, you’ll need to choose a deployment type for your product.
A modern SaaS app: 2 main deployment types
The choice of a deployment type for your product will depend on many factors: the kind of software you’re building, its target audience and market, security standards and regulations, etc. As a rule, you’ll end up with one of the following two options.
- Multi-tenant SaaS
In a multi-tenant model, all your customers (tenants) will share the same environment — a database and supporting infrastructure. Also, all customers will use a single app version, though some level of customization is possible. The onboarding process is fully automated and can be completed with the help of self-service. So, your sales or support team won’t have to be involved. All these characteristics of multi-tenant SaaS make for fast scalability and update roll-out. This option is most popular as it fits a wide variety of cases.
- Single-tenant SaaS
If you opt for a single-tenant architecture, every customer will use an isolated database with supporting infrastructure and will have a unique version of your application. Customers will be able to fully customize the user interface of your product to match their needs. However, scalability will be limited since each installation will require professional help on your side. Following a single-tenant approach makes the most sense in strictly regulated areas like finances or healthcare. It’s also a good option if your target audience has extra security demands.
If you decide to build your product on AWS, keep in mind the following suggestions:
- Make the right choice of AWS services. The AWS ecosystem is huge, so it’s easy to get lost in all its services, tools, and features. Your AWS consulting provider should help you figure out what AWS products will fit your SaaS application best.
- Estimate all the costs. You need to calculate the cost of your SaaS environment and every tenant within it. To make your business profitable, you also should understand the cost-effectiveness of different product features. Your business strategy and pricing model must be based on these numbers.
- Prepare a disaster recovery configuration. Failures and downtimes can happen with every system, so preparation is king. AWS provides multiple resources to help its clients build a disaster recovery plan and ensure product resilience.
- Build an app monitoring strategy. To effectively manage your app, you need to have a robust monitoring strategy. It’ll help you prevent issues and respond quickly should anything come up.
These tips work well for most tech startups building an app on AWS. But the list is far from over — there may be other recommendations that depend on project specifics. So if you need more detailed advice, don’t hesitate to reach out to an AWS consulting provider.