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5 Important Cost Considerations for SaaS Apps Development

August 22, 2016 | saas

How much does it cost to build an app? This is a question that we get from companies all of the time. However, estimating the costs of SaaS app development is one of the toughest challenges for startups and established companies.

How much does it cost to build an app? This is a question that we get from companies all of the time. However, estimating the costs of SaaS app development is one of the toughest challenges for startups and established companies.

In addition to developing the app itself, overhead and ownership costs can take a big chunk of the company’s budget. As a result, the total budget needed to build SaaS app could be anywhere from $100,000 to over $1 million.

With so much at stake, companies need to know effectively plan for and manage the costs of building a SaaS app. Here are 5 important cost considerations for SaaS apps development.

1. Features

As you develop a budget for your SaaS app development, you need to decide which features are must-have features versus wishlist items. Generally, the more complex the app is, the more it will cost. If you can cut down on some of the features without sacrificing the overall value of your app for users, you might be able to save some money. However, if the goal of your SaaS company is to dominate your market, you’ll probably need a more robust solution.

In addition, developing an app for more than one platform is more expensive than an app designed for a single platform. However, apps that are available on more than one platform may have a greater chance at success.

Want to learn more? Read 8 Important Questions to Ask Before Building an App.

2. API Integration

The majority of SaaS apps have at least some basic backend functionality. The main option that you will need to consider is whether you want these features to be built from scratch or plugged into the backend via API integration. Apps that are integrated via API certainly cost less than apps that need to be built from scratch.

Using an API allows you to scale your business rapidly. It also eliminates many of the development steps that you would have to include if you were to build the backend from scratch. In today’s competitive marketplace, reinventing architecture for SaaS that already exists probably isn’t the best use of your budget.

3. Outsourcing

There are three types of outsourcing – nearshore, offshore, onshore. Each type of outsourcing offers specific advantages, including expertise in certain skill sets based on the training that is available to professionals in that specific location. The right option will depend on the specific requirements of your project.

Using an offshore agency may seem like a good idea if you solely look at costs. However, once you consider other factors, such as a language barrier, the experience of the developers, and the time required to complete the project, it might not seem like such a good deal, unless you have ways to mitigate at least some of the risks. Using an offshore app development team may also make it more difficult to protect your intellectual property since you are dealing with the laws of another country. As a result, your business may have limited legal recourse if a problem does arise.

In contrast, nearshore and onshore providers may have the experience, best practices, and support that you are looking for. However, these features may come at a cost that is significantly more than you can afford.

Another option is to consider using a hybrid approach, a combination of onshoring and offshoring. The hybrid model allows you to have access to offshoring and onshoring capabilities, with just a single point of contact. A hybrid provider can also employ a global framework and methodology for managing workers, processes and clients in order to provide a consistent experience regardless of the differences in location among the project’s team members and stakeholders.

Achievion has a hybrid team structure with a core team in McLean, Virginia and an offshore development shop. This structure offer the best of both worlds, making it easier to scale for larger and more complex projects, while reducing costs overall.

4. Overhead Costs

It would be a big mistake to think of app development as just a one-time cost. In fact, the costs of developing an app don’t end once the app is ready to be deployed. Your SaaS app comes with a variety of overhead costs. First, you’ll need to figure out how you’ll get users for your SaaS app. This means marketing and advertising costs, which can be significant and ongoing.

Developing an app also comes with legal costs. Consider the costs of compliance with local, state, and federal laws. In certain highly regulated industries, you may also be required to comply with additional privacy and security measures. Some of the most common compliance laws that SaaS companies have to adhere to include:

Finally, you’ll also need to factor in the costs of accounting. As your SaaS subscriber base grows, your bookkeeping costs will increase as your monthly transaction volume grows. You’ll also need help with auditing, preparation of financial statements, and tax advice.

5. Budget

As you determine the budget for your project, you’ll need to consider the total cost of ownership (TCO), which can include:

  • Licensing
  • Subscriptions
  • Updates
  • Technical support/training

Make sure that your budget is sufficient to cover the TCO beyond the first year. You also need to think about the opportunity cost of building a SaaS app. When your business spends a large amount of money upfront for a software solution, it no longer has this cash available to devote to its core competencies.

In light of all of these important cost considerations, is your budget realistic? The timeline to build an app is typically 6 months to a year. Therefore, your budget should be sufficient to cover the monthly spend for this time period, as well as, for the long-term.

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