Choosing the right SaaS software: a guide for businesses

In today's rapidly evolving technology landscape, Software-as-a-Service (SaaS) software has become a ubiquitous term. However, its meaning can vary significantly depending on who you ask. This is because SaaS exists on a spectrum, with different models offering varying degrees of customisation, control and scalability.

As a business decision-maker, understanding where a particular SaaS software development company solution falls on this spectrum is critical. It can help you anticipate the advantages, disadvantages and potential risks associated with each option, both in the short and long term.

The ideal SaaS: promise and reality

When asked about the benefits of SaaS development over custom-built software, we often hear about lower upfront costs, predictable operating costs, easy scalability, rapid updates, flexible accessibility, platform independence and reduced maintenance. While these characteristics describe an ideal state that is mostly true for the purest form of SaaS, business needs and circumstances can easily create situations where such pure SaaS is either unavailable or not an appropriate solution.

The SaaS revolution: market trends and forecasts

The global SaaS development services market is on the rise. Forecasts predict a compound annual growth rate (CAGR) of 18.6% between 2023 and 2027, with the market value potentially exceeding $300 billion by 2026.

This growth is being fuelled by the proliferation of cloud-based technologies such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform. These platforms have transformed software delivery and revolutionised platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) offerings.

For vendors, the lure is operational scalability - the ability to increase profits simply by adding more subscribers. Meanwhile, small and medium-sized businesses are gaining access to flexible, cost-effective and scalable SaaS solutions once reserved for large enterprises.

The SaaS spectrum: three key models

To help you navigate the SaaS landscape, let's explore three distinct points on the SaaS platform development spectrum:

The "traditional product + professional services" model
The "Feature Flag" SaaS approach
The "Pure SaaS" model: Standard, Self-Service and Scalable

We'll analyse each model based on implementation, feature development, hosting solutions, pricing models, value creation, and associated risks and benefits.

1. The traditional product + professional services model

This model represents the "least SaaS" end of the spectrum. It involves a pre-developed product that forms the basis of usage, with custom development during implementation to tailor the solution to specific customer needs.

Custom development: short-term value, long-term risks

The greatest risk in this model lies in custom development. Features tailored to the customer's needs often become incompatible with later versions. This can lead to additional development and maintenance costs, typically carried out by the original vendor, creating a form of lock-in.

While this approach provides the flexibility to create a highly customised product, it can lead to significant long-term maintenance issues, problematic updates and dependence on vendor pricing. However, it's worth noting that in this model it's usually possible to bring development in-house or find another vendor capable of supporting the product.

Implementation process

The vendor-customer relationship in this model is direct and ongoing during implementation. It's a resource-intensive and lengthy process, often involving a Professional Services (PS) partner who knows the product well and can implement custom developments.

This deep involvement enables a thorough understanding of the customer's business processes and technical requirements. However, the more complex the custom development, the more the customer is exposed to long-term risks. Each new feature relies heavily on existing product functionality and fits into a global feature set, making compatibility with future releases challenging.

The "bespoke" analogy

This model is often compared to a bespoke suit. It fits perfectly as long as fashion (or in our case, business needs) remains constant. However, as circumstances change, the initially expensive solution becomes increasingly expensive to maintain and adapt.

Hosting

In this model, software deployment is flexible. Customers can choose between their infrastructure or a hosted environment leased from a vendor. In-house hosting provides full control and compliance with specific security requirements, while outsourced hosting can reduce IT infrastructure and maintenance costs.

Pricing

Pricing varies significantly from project to project, taking into account individual development and implementation requirements. The base product has a fixed licence fee, but custom developments incur additional costs. Ongoing support, updates and maintenance fees add to the total cost of ownership.

This model offers the least predictable pricing on the SaaS scale, with uncertainty increasing over time due to the high level of customisation.

Value and long-term considerations

While customers receive significant value during implementation through tailored solutions, long-term value creation depends on ongoing maintenance and development. This model is ideal for organisations with specific needs that justify regular, potentially costly development over the long term.

It's worth noting that open-source software often follows a similar model. Although not created with this in mind, the accessible source code often leads to custom modifications. This can result in lost update capabilities and potential security risks, as modified code may not receive critical security updates.

2. The feature flag SaaS approach

This model represents a middle ground, offering a fixed feature set with some flexibility for customisation through feature flags. It strikes a balance between standardisation and customisation, allowing for post-implementation scalability and automatic version updates.

Feature flags: flexibility and complexity

Feature flags are a technical solution that allows certain features to be turned on or off without redeploying code. This provides flexibility but can lead to complex combinations of features, creating challenges in testing and quality assurance.

For example, software with 32 two-state switches results in 2^32 (about 4 billion) possible combinations. Some small business ERP software has been known to have 800 feature flags, resulting in an astronomical number of possible configurations that are impossible to test comprehensively.

Implementation

The vendor delivers the product along with training materials, onboarding services and parameterisation assistance. Partner companies often handle the onboarding required for use.

This model is highly scalable after implementation, allowing the vendor to deploy the software in more locations, while customers use a product that many others are using, ensuring better compatibility.

New features and version updates

At this point in the SaaS scale, a version update or the introduction of a new feature may be completely straightforward, or it may require additional development hours. The structure of the software, the nature of the update and the number and status of feature flags all play a role.

Hosting

Solutions in this model are always individually installed for the customer, typically running in a hosting environment provided by the vendor. This allows for scalability and ease of maintenance. From a customer perspective, it's similar to cloud-based services but doesn't offer instant access or full self-service capabilities.

Pricing

Pricing for basic products and services is standard and transparent, but there may still be individual costs to meet specific needs. Pricing is generally based on usage, allowing for flexibility based on the number of users or cost to the customer.

Value proposition

The aim of this 'loose' SaaS software model is to provide the most value through the out-of-the-box product, with minimal custom development required to achieve optimal results. It provides immediate value through out-of-the-box functionality and vendor support while contributing to long-term value through easier maintenance and compatibility with future releases.

3. The pure SaaS model: standard, self-service and scalable

This model represents the "holy grail" of SaaS, offering maximum flexibility, price transparency and scalability for both vendors and customers. It offers immediate access and self-service implementation, with regular, automatic updates that don't require professional services.

Democratising enterprise software

One of the key characteristics of pure SaaS is its ability to serve the needs of both small businesses and multinational corporations with the same product. In practice, however, there's often still a distinction between SMB and enterprise offerings, reflected in pricing and the rise of vertical SaaS solutions tailored to specific industries.

Customisation and user influence

While individual needs aren't directly addressed, advanced self-service SaaS often allows customers to suggest new features or vote on the product development roadmap. This ensures that the software evolves to meet users' needs.

Customisation is typically achieved through well-documented, simple settings and feature flags that control common functionality across a wide range of use cases.

Implementation

Customers can access the service immediately upon subscription, with no waiting time for installation or setup. If required, the services of a consulting firm can be used to ensure a faster and smoother implementation of the software's features.

New features and version updates

With fully self-service, scalable SaaS, version updates are automatically and seamlessly applied to subscribers' programmes, eliminating the need for professional services or separate development efforts.

Hosting

Customers can access the software anytime, from anywhere, and configure it to meet their needs without involving the provider in setup or implementation tasks. SaaS providers often use the infrastructure of major cloud providers such as AWS, Microsoft Azure or Google Cloud Platform to ensure high availability, security and scalability.

For businesses considering their own SaaS offering, it's worth noting that top-tier cloud services can be extremely expensive. Many large companies, such as Dropbox and Basecamp, have moved to their own data centres to reduce costs. For startups, it may be more advisable to consider tier 2 providers such as Hetzner or Digital Ocean, which offer more cost-effective solutions.

Pricing

The pricing structure in pure SaaS models is usually transparent and usage-based, with options for higher-tier packages that offer additional features and services. This approach ensures that customers know exactly what they're paying for and only pay for what they use.

Pricing can be based on several factors including the number of users, number of transactions, amount of revenue or a combination of these. While this model offers the most predictable pricing, customers should be aware that SaaS product pricing can change significantly over time and migrating to a new system can be costly.

Future trends in SaaS

Looking ahead, several trends are shaping the saas software development company landscape:

Vertical SaaS solutions: There's an increasing focus on industry-specific solutions rather than one-size-fits-all approaches. These vertical SaaS platform development offerings aim to provide tailored functionality for specific sectors or industries.
AI and machine learning integration: SaaS development services providers are increasingly integrating AI and machine learning capabilities, providing users with enhanced functionality and automation.
No-Code/Low-Code platforms: These platforms enable users to build complex applications with minimal technical knowledge, democratising software development and customisation.
Increased flexibility and scalability: The overall trend is away from custom solutions and towards more adaptable, off-the-shelf options that can be easily scaled and modified as business needs change.

While the trend is clearly towards more flexible and scalable digital product development solutions, there will likely always be cases where custom development and long-term vendor partnerships remain the most effective approach. The key is to understand your business needs and where they fall on the SaaS development spectrum.

As a business decision-maker, understanding these models and trends will enable you to make informed choices, ask the right questions and navigate the complex world of SaaS software with confidence. Consider your organisation's specific needs, growth plans and technical capabilities when evaluating SaaS options. Remember, the goal is to find a solution that not only meets your needs today but also supports your future growth and adaptability in an ever-changing business landscape.

Are you considering developing a new SaaS solution or a fintech or health tech startup innovation? Our custom software development services cover a wide range of needs, from custom software development and mobile app creation to launching e-commerce platforms and implementing artificial intelligence solutions. We can help you create software products tailored to the unique needs of your business.

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