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.
- How do I eliminate needless costs from my raw materials and production process?
- How do I ensure that the final item has the smartest design details?
- How do I modify my product quickly and effectively if I have to?
- How do I produce as MUCH as I can, as FAST as I can?
- How do I expand (scale up) and contract (scale down) the production of my product?
Similar factors apply to a SaaS (Software as a Service) business as well:
- Your supplies account for the majority of your costs (software developers, software tools and supporting infrastructure).
- Your program should be designed using top-notch methods, tools, and languages.
- You must have an agile software portfolio that can change properties and advance quickly.
- You need to be able to quickly develop new code and then scale it back as necessary.
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 cheaper 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.
Consideration No. 1 for SaaS Costs: Labour Costs
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.
- The cost of staff supervision - It's necessary to manage people. The software developer's supervisor will establish the priorities for their work, provide frequent coaching and direction, hold formal status reviews, control timekeeping, and evaluate their performance.
- Tools - Machines, datacentre computing capabilities, space and of course software testing and development tools are necessities for your software developers. Your business will buy every single one of these products for an employee. You will also need to buy and continually invest in tools that aid in educating current employees on new technologies AND onboarding new employees in a SaaS environment with a specialized software development crew.
- Furniture and office space - Your business could be paying for some of the rented office space for the software development team, so don't forget about furniture, phone, and internet.
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 SaaS cost factor: Rates of Software Outsourcing
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.
- UX/UI - An easy-to-use and appealing layout is essential to maximizing the design and user experience.
- The program has to be structurally sound and well-documented.
- Database architecture must be tuned so that even the "worst case" volume of transactions may be handled within the goal response time of the system.
- APIs for service compatibility - The software architecture should support common APIs that enable standardized ways of information transfer to and from other systems. A design that enables you to connect with widely used market systems, payment processing, sales tax estimation, online services, etc. is what you need.
- Separation of Responsibilities - The program should be designed to provide user customization of screen contents, visible (or hidden) types of data, and other form elements without jeopardizing (breaking) the fundamental software structure.
- Software must be built to allow updates to take place without any noticeable disruptions.
- The program must be compatible with the current os and data management system's most recent versions in order to operate at its best.
- Support for several platforms - Without compromising the user experience, the program should be similarly accessible across industry standard browsers.
- Continuous Integration/Continuous Deployment (CI/CD) and Dev/Ops to ensure quick, efficient, and predictable releases to production. You must include automated deployment toolkits in your plans for quick adoption of innovative releases of code to your SaaS environment.
- Quality - Test strategies for successful usage routes and appropriate exception handling must be created and built into the product. For a genuine DevOps technique to support frequent or continuous deployment, automated testing is necessary.
- Support for several platforms - The whole solution should include complementary mobile choices. The majority of SaaS systems may be accessed via various browsers on PCs, MACs, cellphones, and tablets.
- Review of management and Managers time expenses continues
- Training for new hires and orientation
- What about SCALING DOWN? Occasionally, business circumstances (such as seasonal or life cycle of the project rhythms) require you to reduce the labour force dedicated to software development. Employee separations that are started by the business typically cost money.
- Termination pay (including continued benefits)
- Time and resources for knowledge transfer offboarding
- Layoffs can affect employee morale inside a firm and possibly lead to attrition. If they believe a temporary slump to be more than it appears to be, software professionals often have more alternatives to "leave ship."
- Skill pool that is available
- Time and expenses involved in hiring, training, equipping, and integrating new team members
- The cost of developing successful software does not instantly offset the initial investment.
- Instead of requiring months to employ and attract staff, outsourced software development businesses can often expand a team in a matter of hours.
- You have individuals writing code, not complicated factory floor machines.
- Software is the OUTPUT (finished good) of the business process; it does not support it. Providing software to the market with best-in-class features must be a conscious decision.
- You should be able to respond quickly and with strong technical abilities to modify your software product as market appetites alter.
- You must quickly scale up or down your capacity for software development in order to reach a "N plus 1" or "N minus 1" cost equation.
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 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.
Third SaaS cost factor: Agility (Flexibility)
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.).
Fourth SaaS cost factor: Scale
Your SaaS "software factory" has to be able to "create software code" in 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:
Consider recruitment costs
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 illness.
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 very 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.