Over the past decade, SaaS (Software as a Service) has become a popular model for developing new software products. According to Blissfully's report, total spending per company on SaaS increased by 50% in 2020 compared to 2018. The largest cost component of building a SaaS company is product development costs. This includes the design, development, launch, and enhancement of the SaaS application.
Often, founders of SaaS companies are not aware of the steps, tools, and checkpoints they should follow while creating their product. This can lead to overspending in the beginning which can make it difficult to achieve profitability and help your company grow effectively.
With proper awareness of the SaaS product development process, costs can be better managed. In this p, we will discuss some of the important practices to optimize product development and eliminate unnecessary startup expenses.
Requirements analysis is one of the first and most important steps in software development. A requirements document defines the purpose, functionality, interface, product scope, and system performance criteria. Not only it helps you define everything, but it also helps you communicate your requirements to your software development team.
Good requirements analysis and scope definition tend to improve quality planning and thus reduce the cost and duration of a project. Improper requirements analysis can leave entrepreneurs facing longer project timelines, higher costs, and producing lower quality products.
Most SaaS startups want to launch with more features because of the belief that it will help them increase adoption. However, some features cost more and do not guarantee a profitable outcome. It is important to identify and eliminate all unnecessary features during the requirements analysis. It helps to refine the scope to better utilize resources that efficiently create useful functionality.
This can be a daunting task, where you'll need to engage your sales team and technical team to identify which features are most important and which are unnecessary. Those that you identify as unimportant can be removed from the list or rescheduled for a later development phase.
Lean product development strategy or MVP (Minimum Viable Product) refers to creating a product with basic functionality and offering it to a specific audience for feedback. It is an ideal and highly recommended strategy to reduce costs and validate if there is demand for your product or service. Onectus strategy extends this topic further more, building MVPs of features that are part of a product that is on a late stage.
If you remember the launch of the Instagram app 11 years ago, they were only launched for iOS, there was no Android app. The first version of the Instagram app leveraged a simple Facebook login and only included the ability for users to post images, like, comment, share and follow posts. They didn't have all the bells and whistles like reels, videos, eCommerce integrations and exploration features. They were able to bring their market valuation to $1.0 billion with the iOS MVP alone.
A major mistake made by many SaaS company founders is not spending enough time on the user interface/UX of the product. The usability of your product can define your success. UX design should be attractive, easy to use and intuitive to navigate without affecting performance.
Less money spent on design can push those expenses into the development phase, potentially lengthening development time and building costs. It can also increase the churn rate of your customers, who sign up only to realize the product isn't what they expected.
To save on design costs, it's important to efficiently execute wireframes and visual design before moving into development. This helps you see the user experience before developing the product. If you develop with a half-baked design, you'll end up spending more time and money while releasing a less-than-ideal experience.
As a SaaS startup, you'd be better off outsourcing the components of your project than hiring full-time developers. If you hire full-time, you'll have to spend a lot of money to recruit, integrate, and manage the team. You'll also have to build the infrastructure to accommodate full-time employees. If you don't have enough tasks assigned to them at first, you may still find yourself paying but keeping valuable talent on the bench.
All of this adds to your costs. For the first few years of product development, it's best to outsource the project. Outsourcing to a company gives you access to various skill sets and experience. A diverse team can bring a lot of value in terms of skills, experience, and problem solving. Outsourcing also reduces the cost of infrastructure (e.g., office building, furniture, computers) because the provider will take responsibility for setting up a management structure for the team.
Another advantage of outsourcing is that it gives you the flexibility to hire extra staff when needed for the project and release them once the requirement is met. Also, if you feel you work well with some of these developers, you can potentially extend an invitation to hire once your business has taken off.
Another way to mitigate the expensive people management phase, is to build Development/Design teams inside software houses, that is an efficient method to increase the speed to market while keeping costs low - this is what Onectus is partly dedicated to.
Effective communication with the development team is one of the most important components of successful, timely, and cost-effective completion of the software product. Regular interactions with the product development team increase clarity of scope, minimize gaps, delays, bugs, which in turn will keep costs under control.
You should maintain a project management tool like Jira, Asana, Notion, or any other project management tool; Of course, is mandatory to have a proper Product owner/Project manager doing his work to keep costs, time and quality under control, while prioritizing user-stories properly. You should encourage all team members to communicate any obstacles or problems they face.
SaaS companies require servers and other network infrastructure to run applications. You can reduce your upfront costs by using a cloud infrastructure such as AWS, Azure, Google Cloud as these platforms only charge you based on usage. Before the launch of these cloud platforms, software companies had to invest a lot in server setup and maintenance.
With cloud servers, setup and maintenance costs become negligible and you generally pay based on usage. Make sure you use a reliable and popular cloud backend server for your SaaS product to avoid outages.
User acceptability testing (UAT) is necessary once your product has undergone unit testing, integration testing, and system testing. Inefficient UAT results in poor product quality, increases user dissatisfaction, increases marketing expenses and potential post-launch development expenses. Many startups don't pay enough attention to UAT. Either they are unaware of the importance or don't want to spend adequate money on testing.
Running a detailed UAT requires an experienced tester to understand your application, create a test plan, and execute the test. You shouldn't hire a full-time tester for this role as you won't need this person 40 hours a week, especially when you are in the MVP phase.
Also, you shouldn't hire the tester from the same company that is building your product. A tester from the same company can be biased against finding defects. If possible, hire a third-party tester. You can find experienced testers on websites like Upwork for $15-$20 per hour who could do this job efficiently. Having an on-demand tester will keep testing costs and application performance in check.
Creating software products is a process, if you follow the right process and tips, you can create better products at the right cost. Most of the time avoiding steps or not following the expert's advice will come at a cost in the long run. SaaS startups should inquire about software product development as it is an important part of their investment and the product is what drives monetization. We hope these tips will help you keep your product development costs under control - in case of questions - ask our development team!