SaaS Development Costs

SaaS (software as a service) Development Costs refers to the total expenses associated with the development of a marketable SaaS application. Cost containment is a primary concern for ISV’s (independent software vendors) who are moving to the SaaS model of software development for the various software applications they wish to deliver via the cloud. There are primarily two types of costs that can be associated with SaaS development: Direct SaaS Development Costs, which include all of the expenses associated with the development and maintenance of the software that is being provided as a service; and Direct SaaS Customer Costs, which include all of the expenses associated with acquiring a specific SaaS customer, such as sales commissions or set-up costs, etc. This article focuses on the Direct SaaS Development Costs which are dependent on the development and deployment approach taken by an ISV.

Cost Savings Options for SaaS Development

Many ISV’s (independent software vendors) who have historically delivered traditional on-premise software applications are now being prompted to adopt a new business model that includes the development of SaaS offerings, in order to remain competitive in a specific segment of the software industry. ISV’s who venture into the cloud computing services market have two options to choose from, to deliver a SaaS offering to the cloud, while effectively containing costs, as follows:

  1. IaaS (infrastructure as a service) – under this development and deployment scheme, an ISV will incur the expense of developing its SaaS offering in-house and will incur the expense of externally hosted infrastructure services (i.e. server capacity). Note: this option does not provide a complete solution for cloud based software development, configuration, deployment and delivery.
  2. PaaS (platform as a service) – under this development and deployment scheme, an ISV will incur the expense of developing its SaaS offering in-house and will incur the expenses of externally hosted infrastructure services and run time services, which provides a complete solution for cloud based software development, configuration, deployment and delivery.

Of the two options provided above, PaaS offers a greater opportunity for costs savings for an ISV over IaaS. At the forefront of the cost savings that PaaS delivers are: the elimination of the installation and maintenance expenses for development and testing servers; as well as the elimination of the labor costs associated with the development of SaaS management services. PaaS solutions like Apprenda’s Private PaaS include an array of SaaS management services that save ISV’s from the expense of developing these critical tools in-house. Apprenda’s Private PaaS offering helps lower the SaaS development costs for ISV’s, by including the following features in their PaaS solution: SaaS user provisioning, SaaS user self service management, SaaS subscription management, SaaS payment processing and SaaS billing & metering functionality, etc. The utilization of a PaaS solution like Apprenda’s Private PaaS is a smart choice for any ISV who wants to deliver its SaaS solutions in the most cost effective manner possible. The platform services offered by Apprenda can significantly reduce the time-to-market for ISV’s which also helps speed up the timeframe for SaaS revenue recognition (cash flow) which can ultimately be the determining factor for success as a cloud services ISV.

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