There are dozens of reasons why cloud-based apps fail, but let’s not focus on the negative. It’s far more exciting to learn how your app can succeed and thrive. Knowing how to scale a SaaS business is certainly one of the primary ways to grow your startup into a profitable enterprise.
Acropolium has quite a few tips to share that would make the app future-proof. You’re welcome to read them below! But before we share “how,” let us tell you “why” scaling your SaaS business is so critical.
Reasons to scale a SaaS business
Scalability implies building your business strategy and products in a way that allows them to grow. It’s about capitalizing on your success, repeating it on a grander scale, and one-upping your competitors.
Overall, being able to scale your SaaS startup means several things:
Companies can modify their offerings based on current or predicted market conditions. This means you can add new features or restructure the business model if the demand or market psychology shifts. It also ensures you can easily change your IT infrastructure based on the growing or decreasing user base.
Being able to quickly scale your SaaS product means you can maintain a high cost-performance ratio. Additionally, cloud computing services that offer cloud storage and computing resources help save money that would otherwise be spent on on-premise infrastructures.
According to the 2020 report by OpsRamp, 90% of companies use cloud platforms to reduce 10% of their IT budgets. Nearly half of the companies are optimistic, believing cloud infrastructures can bring their costs down by 30%.
Cloud environments can improve the availability of your platform. You get to avoid expensive downtime (which costs up to $400,000 an hour to an average enterprise) and maintain critical processes. And if something were to happen to your data after a ransomware attack or an earthquake, you could minimize damage with data backup tools.
Faster development time
Scalability allows deploying products without overengineering. You can build SaaS solutions with essential features and limited resources, which shortens the development cycle. Then, as the demand grows, you can add other services and allocate more computing power.
See how this works? You don’t spend too much effort on development and don’t overstuff your SaaS with unnecessary functionality.
More potential for growth
Flexibility gives your businesses more expansion opportunities. Here’s an example: you can add features or experiment with subscription tiers to attract new customers and retain existing users. Besides, you can invest in new servers to make your SaaS perform better for people in different geographic areas. And, as we mentioned, being able to adjust computing resources keeps your performance high despite the increased load.
With all that said, attaining scalability requires strategy. So, let’s talk about some techniques that can help you out.
How SaaS companies scale their business: 10 strategies
True scalability means aligning your business strategy and IT infrastructure for the evolving demand. That is why we want to show you scaling from all angles. It’s going to be a long ride, so now’s a good time to grab a pen and notebook.
Adopt modular approach and microservices
Companies that follow the principles of modularity can divide their business into smaller independent units. You can appoint teams for units and give them autonomy to choose strategies that fit their specific functions best.
Microservice architecture works similarly to modularity. With it, you split your system into loosely coupled but highly cohesive modules. These modules have specific functions and don’t depend on other components of your system. As a result, you can easily add new features or update existing ones without causing the entire system to crash.
Outsource your business functions
Outsourcing is critical for your scalability. According to the 2020 Deloitte Global Outsourcing Survey, 40% of companies agree that it allows them to remain flexible, and 15% believe it helps them become more agile. It also helps companies reduce their operating costs and improve speed to market.
Hiring an experienced software development company is the fastest way to enhance your in-house team with relevant skills. Not to mention, outsourcing eliminates costs on training, retaining, and renting office space for your employees.
Outsourcing can be done strategically to scale up your product. Do you want to boost the performance of your SaaS in specific regions? Easy — rent servers and Content Delivery Networks (CDNs) to improve latency. Want to have round-the-clock support? Hire IT specialists from areas with different time zones. Don’t know how to monetize your product? Recruit former entrepreneurs and C-level managers for senior positions.
Promote through multiple channels
Effective marketing is more than buying ad space, social media promotion, and search engine optimization. Don’t get us wrong — these methods work, but attracting customers requires unique approaches. Here’s what we’re talking about.
You might want to promote your brand through influencers. That’s what Spotify did when it aimed its streaming platform at Swedish music bloggers that spread the word about the app.
Additionally, you can publish landing pages, tutorials, and case studies that showcase the advantages of your solution. Or, if you feel confident, you can try taking jabs at your competitors as Apple did with its iconic “Get a Mac” ad campaign.
It’s a good idea to use your loyal customers as a sales channel through referrals. Try incentivizing them to recommend your product to their friends with discounts, cashback, or free subscription months.
Speaking about free offerings…
Offer free subscription models
Free trials and freemium tiers can convert curious users into paying customers. The Freemium model gives a glimpse into the key features of your product and motivates users to pay for the whole pack. Free trial is suited to make users rely on the tool, so they would want to keep using it to solve their problems for a small monthly fee.
You can even combine the two. Try offering a free tier with an option to try the premium version, then monitor how it improves your conversion rates. Alternatively (or additionally), a refund policy might prompt more users to give your software a try.
But it’s not just about conversion rates. Free offerings allow you to gather feedback from a broader range of users. Those who didn’t convert are likely to share what’s missing from your product, which could help you scale your SaaS product in the right direction.
Integrate third-party APIs
Out-of-the-box software can help you scale your SaaS startup. Instead of building the entirety of your software, you can connect third-party services to your platform via application programming interfaces (APIs).
Let’s say you’ve developed a prototype for a telehealth app. The first testers point out that you need a tool to check a patient’s eligibility for reimbursement. With a suitable API, and there are a lot of those on the market, you can add this feature while saving you a lot of money.
Communicate with your audience to retain them
Quality omnichannel support is the best way to retain your users. This means investing in a customer portal with FAQs, knowledge bases, and, of course, self-service features that 88% of consumers in the US expect from online businesses.
AI-powered bots can be a nice touch. They can help your staff handle low-priority requests and common questions, which could be the bulk of all customer requests. We’re actually expecting over 90% of organizations to use AI-powered chatbots by the end of 2020 to improve customer support and reduce operating costs.
You should also keep your client base engaged. You can do this with software updates and redesigns. Plus, it’s wise to spark their interest with special offers and exciting content on your blog.
Leverage cloud-based infrastructures
Cloud computing platforms like Google Cloud, Microsoft Azure, and Amazon Web Services allow you to rent their cloud environments, complete hardware, operating systems, and applications.
You basically get everything you need for your business operations and software projects faster and cheaper than with on-premise servers. Scaling your infrastructure is infinitely faster with cloud platforms. And, as we mentioned, the cloud vendors manage the IT infrastructure for you.
Keep your SLAs up-to-date
You know that you’ll need more servers, faster response times, and more reliable uptime for your SaaS as your business expands. It’s therefore critical that the Service Level Agreement (SLA) with your cloud infrastructure provider reflects your future needs. So, we recommend reviewing your agreement regularly to know when to negotiate new terms.
Prioritize analytical data
According to the 2018 report by Forrester, two-thirds of businesses saw a strong positive impact on management and goal alignment from Agile practices. In addition, following these techniques helped over 60% of responders improve their productivity and time-to-market.
A data governance program and analytics strategy can help you surpass competitors who don’t rely on analytical insights. You also could improve your capabilities by integrating analytic platforms with AI-powered tools. This could help you extract data across your business units, analyze discrepancies and invoice errors, and even predict socio-demographic trends.
Follow Agile development practices
The 2021 State of Agile report suggests that two-thirds of businesses saw a strong positive impact on management and goal alignment from the adoption. Following these practices helped over 60% of responders improve their productivity and time-to-market.
Besides, adopting DevOps practices, primarily automated testing and continuous integration, is known to improve code deployment by nearly a thousand times. It could also help you iterate changes to your product or service enormously faster.
With all these strategies in mind, how do you prepare existing software and its underlying infrastructure for growth? Keep reading to find out.
Guide to scaling a SaaS product
There’s no easy way to build an app that can quickly grow from a few thousand to millions of users. It’s even harder to remain competitive in several markets at once. So, here are a few steps that could help you create a future-proof solution.
1. Assess your business
Analyze your company from different perspectives to ensure it can scale along with the demand. Here’s a short version of a checklist of items you should assess:
- Technical specifications of your software and hardware (cloud platforms, data centers, servers, backend apps, open-source tools)
- Sustainability and scalability of your architecture
- Intellectual assets (copyrights, patents, software licenses)
- Load testing tools and methodologies
- Budget for servers, databases, and operations
- Legacy components that require replacement or migration
- Internal policies and procedures
- Organizational chart with employees, their roles and responsibilities
- Cybersecurity mechanisms and frameworks (authentication management, encryption, control mechanisms, intrusion detection modules)
An in-depth technical assessment can uncover operational inefficiencies, business logic issues, unnecessary code loops, and database bottlenecks. Basically, all the things that might hurt your system’s scalability.
2. Study your target markets
Being successful in your local market doesn’t guarantee international success. Before expanding your services, you need to gather as much information about your target markets as possible, including:
- The desires and pains of potential users
- The validity of their problems and willingness to pay for a solution
- Currently available solutions and their differences from your product
Additional research is necessary when you’re expanding your scope on the local market, too.
3. Determine an optimal business strategy
You need to find an appropriate business model early on if you don’t want to fail like 17% of startups. However, refining your pricing strategy for multiple markets takes time.
Subscription-based strategies are the most common among SaaS businesses. They attract customers with lower fees and usually translate into higher lifetime value. But if your pricing increases with time, you risk losing some of your paying users.
To scale their SaaS businesses without overcharging clients, 54% of companies use a tiered pricing model with different subscription plans based on provided features. You might also introduce usage-based pricing so that the rate will depend on how much data the user utilizes. Corporate clients might benefit from user-based pricing, where you charge them based on how many people use a single account.
Be brave to experiment with revenue models. After all, 24% of SaaS companies use hybrid strategies. You might also structure your pricing differently based on regions, as some customers are more willing to pay than others.
4. Select the right SaaS architecture
Appropriate architecture can ensure that your software has enough juice to handle increasing demand. You’ve got two options for SaaS infrastructure:
- Single-tenant SaaS architecture offers dedicated servers, databases, and computing power. You get complete control over your software and advanced security, but it comes at the cost of more complex scaling.
- Multi-tenant SaaS architecture shares software instances and the supporting infrastructure between multiple customers. It gives users less freedom to customize their cloud environment but makes it easier to allocate resources between databases and servers to handle heavier workloads.
Note that your cloud provider can have several options for tenant isolation. For instance, AWS offers accounts that run on dedicated hardware, multi-tenancy solutions, and various hybrid models.
5. Validate your concepts with an MVP
Obviously, you want to test your ideas with minimal risk. That’s why you should go for a minimum viable product (MVP) — a simplified version of your SaaS product — to validate your product, market demand, and revenue model.
Concentrate on the critical aspects of your software for an MVP and scrap secondary features for the time being. In addition to saving you a ton of money and effort, it helps you see if your SaaS has a paying audience in the first place. And if your project resonates with the market, you can scale it up into a functioning prototype or full-scale product.
6. Be ready to alter your business plan
Growth tends to slow as your organization matures and can quickly flatten out if you’re not flexible enough. So, you must be willing to readjust and repurpose your SaaS to remain successful, even if that means shifting your target audience.
Take this example for inspiration. PayPay started out as a money exchange service for Palm Pilots (an early version of today’s smartphones). Seeing that the project wasn’t as successful as hoped, they refocused on email payments. The company readjusted its course yet again after eBay became popular and became its primary payment process service. This led to eBay buying PayPal for $1.5 billion, solidifying it as the most popular money exchange startup.
So far, we’ve only spoken about SaaS scaling in a positive light. But now is the time to address issues you can encounter along the way.
Common SaaS scaling issues
Companies that put too much emphasis on scaling or don’t know how to do it might find themselves buried in issues. Let’s examine the common problems you should learn to avoid.
Spending too many resources beyond the essential needs can fail your startup and gives you less room to experiment and pivot. You also can become too committed to your current strategy, which leaves you way less flexible.
Sure, it’s right to build your SaaS with scaling in mind, but don’t scale from the get-go. For instance, microservices architecture can be too resource-heavy and unnecessary for smaller businesses. Startups might be better off with modular monolith architecture that divides systems into modules with defined boundaries. This way, you won’t consume as much computing power, and it’ll be easier to switch to microservices later on.
Spreading too thin
Focus is critical at the early stages of your company. Those who don’t understand this try to reach as many target audiences as possible, invest in too many features, or target all marketing channels at once.
That’s dangerous territory. You won’t be able to effectively monitor your marketing efforts and their results with too many channels. Plus, you risk losing understanding of the customers and services to prioritize.
Data security and compliance
About 66% of IT companies cite data security as the most critical challenge when they migrate to the cloud. In addition to that, compliance with laws is a crucial concern for healthcare and fintech niches. Failing to comply with regulations and cybersecurity practices leads to data leaks, financial damage, and government fees.
You should prioritize robust security mechanisms when going from on-premise to scalable cloud-based infrastructures. This might include encrypting your databases, using multi-factor authentication, implementing role-based access control, and running penetration tests. And don’t forget about regular employee training.
Developing a SaaS solution with the potential for continuous improvement requires a skilled team with a relevant technical stack. But 19% of companies don’t have an experienced IT team to manage their cloud infrastructure effectively.
Well, some approaches can reduce your engineering effort. For example, low-code platforms can improve the development speed with pre-built templates and reusable code. According to the 2019 research by Forrester, 50% of low-code adopters say this technology offers the fastest time-to-market.
Creating scalable software still requires a great deal of expertise. So, it’s reasonable to hire a software development company with the skills you need for your project.
How Acropolium can scale your software product
At Acropolium, we know why cloud infrastructures may run slow and limit your growth. But, more importantly, we know how to resolve these issues and help your SaaS scale along with your business.
Our teams have helped dozens of companies restructure, migrate, or build cloud infrastructures. Here are just a few of the projects we worked on.
Cryptocurrency trading platform
Acropolium has built a scalable crypto trading platform. Our tasks included optimizing the SaaS architecture, setting up documentation, and developing an MVP on short notice.
We started by assessing the company’s infrastructure and finding opportunities for improvement. After building the technical requirements and documentation, we chose the Scrum methodology to cope with the tight deadlines and finished in under six months.
Our solutions allowed the company’s scalability to grow by 300%. The platform itself has been improving after release, all thanks to its scalable architecture.
Hotel management platform
The client asked us to optimize its hotel management app to work faster and withstand a growing amount of data.
Our audit showed that the client’s single-tenant architecture wasn’t built for scale. So, we focused on migrating the legacy functionality into a multi-tenant environment. The new architecture could integrate with old features and third-party services. Our efforts resulted in efficient cloud-based software that reduced the client’s costs by 40% and led to a 30% increase in revenue.
Scalability is something you should bear in mind no matter your initial plans. Need we remind you about garage startups that have become today’s technological giants? It helps you adjust to the market to maximize revenue or keep afloat in tougher times. At the same time, scalable architectures help you balance effectiveness with costs despite increased workload and demand.
The strategies we described are complicated, plus there are many things to do. Where do you even start scaling your SaaS? The first and best thing to do is hire an experienced vendor who knows how to incorporate these strategies.
Acropolium’s expertise can help you bypass popular issues and build a secure and scalable SaaS with fewer risks. So, if you want to entrust your project into capable hands, we’re always ready to talk business.