What Is SaaS: A Simple Explanation, Examples and How to Build Your Own SaaS Product

SaaS (Software as a Service) is a model in which software runs in the vendor’s cloud, and users access it through a browser or an app and pay a subscription. There is nothing to install on your own servers, no perpetual licence to buy and no manual updates: the vendor takes care of access, data storage, security and new versions. Familiar examples include Zoom, Google Workspace, amoCRM, Notion and cloud Bitrix24.

SaaS in simple terms

Compare two ways of watching films. In the past you bought a DVD: you paid once and owned the disc, but no new films ever appeared on it, and if it got scratched, that was your problem. Today you subscribe to a streaming service: you pay monthly, watch on any device, and the library and quality update by themselves.

The same thing happened to software. Companies used to install accounting systems or CRMs on their own computers, buy a boxed licence and call a specialist for every update. With SaaS, a company simply opens the service in a browser, pays per user or per plan and always works in the latest version.

How the SaaS model works

• The software and data live in the cloud. The vendor runs the servers, databases and backups. The customer only needs internet access and a browser.

• One product, many customers. Usually all customers use a single instance of the application, but their data is isolated from each other. This is called multi-tenant architecture.

• Subscription pricing. Monthly or annual, often per user or by plan with different feature sets. Free trials or a free tier (freemium) are common.

• Updates without customer effort. New features and fixes are released for everyone at once, with no installation.

• Access from any device. Desktop, tablet or phone — just sign in.

SaaS vs PaaS vs IaaS

All three are cloud models, but the customer gets a different level of “readiness”.

• IaaS (Infrastructure as a Service) — renting virtual servers, storage and networks. Everything else — the operating system, databases, the application itself — you install and maintain yourself.

• PaaS (Platform as a Service) — a ready environment for developers: servers, databases and deployment tools are already set up; you just write and run your code.

• SaaS (Software as a Service) — a fully finished application. The customer configures nothing “under the hood” and simply uses the service.

A simple food analogy: IaaS is an empty rented kitchen, PaaS is a kitchen with a stove and groceries where you cook yourself, and SaaS is a ready meal delivered from a restaurant.

Note that many SaaS products are themselves built on IaaS or PaaS: the developer rents infrastructure and sells customers a finished service.

SaaS examples

• Communication: Zoom, Slack, corporate messengers.

• Office work and documents: Google Workspace, Microsoft 365, Notion.

• Sales and CRM: amoCRM, cloud Bitrix24, Salesforce.

• Accounting and operations: cloud accounting, online cash registers, inventory systems.

• Industry services: online booking for salons and clinics, restaurant software, online school platforms, logistics services.

The last group is especially interesting for entrepreneurs: niche industry SaaS products (called vertical SaaS) solve a specific problem for a specific business and often compete not with global giants but with Excel spreadsheets and manual work.

Pros and cons of SaaS

For companies that use SaaS

Pros:

• quick start — sign up instead of a months-long rollout;

• no large upfront spending on licences and servers;

• updates, security and backups are handled by the vendor;

• easy to add or remove users.

Cons:

• data is stored by the vendor — check where exactly and how it is protected;

• dependence on the internet and on the service’s stability;

• a multi-year subscription can cost more than a one-off purchase;

• limited customisation: you adapt your process to the service, not the other way round.

For those building a SaaS product

Pros: regular, predictable revenue (MRR — monthly recurring revenue), scaling without a proportional rise in costs, and user behaviour data to guide product development.

Cons: you can’t “ship it and forget it” — the product needs ongoing support, infrastructure and development; customers can leave any month, so retention matters more than one-off sales; revenue is small in the first months while development and marketing costs are already there.

When a business needs its own SaaS

There are plenty of ready-made services, but building your own SaaS product makes sense in two cases.

1. You want to sell a service to the market. You know an industry from the inside and see a problem that existing solutions handle poorly: no localisation, no integrations with local payment providers and government systems, no Kazakh language support, no account of local specifics.

2. You are productising your own expertise. For example, a logistics or service company turns an internal tool into a product for partners and clients and gains a new revenue stream.

If you only need an internal system for your own company, that is usually not SaaS but custom development, with a different approach to architecture and budget.

How to build a SaaS product: step by step

1. Validate the problem. Talk to 10–15 potential customers: how they solve the task today, what it costs them, and whether they would pay for a solution every month.

2. Choose a monetisation model. Per user, per volume (orders, employees, locations) or tiered plans with different features. Calculate in advance how many customers you need to pay back development.

3. Launch an MVP. A first version with one key scenario, sign-up, subscription payments and a simple admin panel. Read more about the approach in What Is an MVP.

4. Get the architecture right. Multi-tenancy, roles and permissions, backups, logging and data security. Rewriting these later costs more than doing them right from the start.

5. Connect payments and analytics. Recurring billing, invoices for companies, activation and churn metrics — without them you won’t know whether the model works.

6. Grow based on data. Add features customers are willing to pay more for, and find out why those who left did so.

Choosing a development partner deserves time: it determines whether the product can grow without a rewrite. We covered this in How to choose a contractor for custom SaaS.

How much does SaaS development cost

The cost depends on the number of roles, integrations, platforms (web, mobile apps) and security requirements. A sensible strategy is not to build a “big platform” straight away, but to start with an MVP and invest in development as the customer base grows.

For reference: at LEGKO, a web application MVP takes 2–4 weeks and starts from $4,399. For SaaS that evolves continuously, the Time & Material model works well — you pay for the work a dedicated team actually does.

Don’t forget post-launch costs: hosting, monitoring, support and development. See how to calculate them in our article on the cost of supporting a product after launch.

SaaS metrics worth knowing

• MRR / ARR — monthly and annual recurring revenue.

• Churn — the share of customers or revenue you lose each month.

• CAC — the cost of acquiring one paying customer.

• LTV — how much a customer brings in over their entire time with the service. A healthy model has LTV well above CAC.

• Activation — the share of sign-ups who reach the product’s first moment of value.

FAQ

What does SaaS stand for

Software as a Service — software delivered as a service over the internet.

How is SaaS different from regular software

Regular software is bought and installed on your own computer or server. SaaS runs in the vendor’s cloud, is accessed over the internet and is paid for by subscription.

Is it safe to store data in SaaS

With reliable vendors, yes: data is encrypted, backed up regularly and access is controlled. Before choosing a service, check where the data is physically stored and whether that meets legal and industry requirements.

Can you build SaaS with a no-code builder

Sometimes, to test an idea. But once you have paying customers, multi-tenancy, integrations and real load, no-code tools quickly hit their limits. A product meant to grow is better built on a proper tech stack from the start.

How long does it take to launch SaaS

A first version (MVP) with a key scenario and subscription payments can be launched in a few weeks. After that, the product evolves continuously — that’s the normal life of SaaS.

Have an idea for a SaaS service in your industry? Take a look at our case studies and request a proposal — we’ll help you define the MVP, choose a monetisation model and launch the first version.