A manufacturing business is aware that it must reduce the cost (price) of its go-to-market product while maximizing its capacity to produce and deliver the finest possible product. The owner will be asking themselves, these questions while they stroll around the production floor or look at the company's financial statements.
All of these elements have an impact on the price of creating the
software that forms the basis of your SaaS solution.
What if, however, there were more effective ways to create your software? What if some components of your program could be generated more cheaply and more rapidly somewhere else with the same (and better) design features?
To assist you in better managing SaaS development expenses, here are 4 SaaS cost considerations.
Let's look at the parts of your labour bill, or the price of paying a
Software Engineer to work for you. It goes without saying that you give them a salary, which you can
easily convert to a hourly basis. However, DON'T STOP THERE — don't overlook these additional
significant expenditures. Your labour costs consist of:
Benefits for employees include paid time off, sick leave, insurance, payroll taxes, and retirement contributions.
Your "fully burdened cost" is the sum of salary and employee benefit costs. You must pay these expenses when you employ a software developer. Per the Bureau of Labour Statistics, the national average cost of the these employee benefits is 31% of an employee's fully burdened cost. In contrast to hourly workers, this percentage will be larger in a corporation with high-skilled technology employees.
Key Takeaways: Compared to outsourcing, using internal people for
software development is more costly than you may imagine. In some circumstances, the overall cost of
having a software developer on staff might be close to $100/hr or higher.
In contrast, outsourcing software development can result in savings by lowering (or eliminating) expenditures for tools, supervision activities, office space, and developer salaries.
Second-best design is a factor in determining SaaS costs.
There must be several design components that adhere to best practices in a complicated software system or suite that is offered as a SaaS.
Like quality, security cannot be "bolted on"; software must be created
from the ground up with an eye toward balancing ease of use and access with safeguarding against
unwanted data leaks or having your service terminated.
This has an impact on coding standards, infrastructure, software toolkits, and design philosophy. Denial of service, cross-site scripting, and buffer overflows are common types of attacks. In order to prevent cross-site programming and other hacker vulnerabilities, the software must be secure and adhere to industry best practices.
Important Takeaways: Complex software provided through SaaS software should have design characteristics that necessitate the coding efforts of software engineers with such a wide range of expertise. By outsourcing software development, you have access to centers-of-excellence throughout the world that are staffed by programmers with advanced and specialized expertise. Their talents come from recognized training, software development for several businesses, and focused industry expertise, all of which are crucial for your SaaS solution.
Things will change, even if your system is well-architected. Your system
may need to adapt as a result of consumer demands, legal constraints, and competitive challenges, which
may mean learning new skills. What do you do if you require software development but it's either out of
your price range, hard to get in your area, or both? Even if the talent is there, it takes patience (and
money) to find, hire, and onboard new employees.
Similar to this, educating current development employees in new methodologies and tools results in downtime since they must stop doing work while they acquire new information and subsequently become proficient with the technologies. Along with the price of the new instruments that are needed, there is also all of this loss.
Key Takeaways: The user community holds SaaS providers to a higher standard, expecting them to produce solutions that advance the industry or keep up with it. You might quickly deploy teams with fresh knowledge and specialized experience by utilizing software development outsourcing partners (industry verticals, subject matter expertise, etc.).
Your SaaS "software factory" has to be able to "create software
a way that is scalable, expanding or decreasing activity as circumstances change. Your ability to
generate software cannot be limited by the number or capabilities of your software crew.
Your cost structure should ideally be "N + 1," which means that the cost of adding an extra hour of work is equal to the developer's labour rate per hour. However, if increased, capacity requirements necessitate greater employment. You'll see a spike in expenditures that you'll need to try to balance over time through productive work. As you continuously strive to balance the up-front expenditures of a new worker, your cost of labour will scale in a "stair step" rather than a linear manner:
Key Learnings: There are certain inherent drawbacks when relying on an internal hiring strategy to boost software development capabilities for your SaaS business needs:
Compared to your local possibilities, the talent pool that is available
on a worldwide scale is far larger and more quickly deployable. When necessary, it is quick and simple
to cut or terminate software development teams. Another benefit of outsourcing is that it eliminates
unforeseen "gaps" in capability brought on by events like sudden employee resignation or prolonged
Many of the same financial issues (and difficulties) that conventional manufacturing companies and traditional IT departments face apply to SaaS solution providers. Some of the standard corporate expense management difficulties are exacerbated for a SaaS organization.
The factors affecting your labour are crucial. Your only "knob to turn" often is labour cost control done properly.
It may seem odd to consider software development outsourcing as just a primary strategy for a SaaS firm. However, almost every factory employs a certain percentage of "bought parts" that end up in the final product that is sold. Why? because buying some things rather than manufacturing them in-house is more affordable, quicker, and effective.