3 Reasons for Saas Development Failure – And How to Fix Them

For every Adobe, Shopify, and Salesforce, there’s a defunct SaaS platform in the digital garbage can. Software-as-a-Service applications are notoriously difficult to get right, as so many of the potential uses have already been delivered by the world’s biggest players.

According to Startup Genome, only one in 10 SaaS startups grows significantly in its first five years of operation. Put another way, nine out of 10 SaaS applications are destined for failure.

So, the odds of long-term success are already against you. But if you know where most projects go wrong, you can avoid the pitfalls. All you need are the insights and expertise of a proven SaaS software development company. In the meantime, here are three of the most common pitfalls contributing to the SaaS graveyard.

The Dysfunctional Fixed-Price SaaS Development Model

Imagine you’ve signed a six-figure fixed-price software development deal with a leading developer. To get to a set price, you had to agree to a scope that is fixed in stone. While that price seemed like a bargain at the time, you’re quickly realizing that it wasn’t the fixed price you were expecting.

Six months later, and the market has changed. Users aren’t responding to certain aspects of your SaaS platform, and they’re letting you know. To achieve the sign-ups you’d initially hoped for, you have to put in a change request. But, to your horror, the changes aren’t included in the original deal. You’ve got no choice but to stump up more cash – lots of it.

One of the most common reasons for the failure of SaaS projects is the adoption of fixed-price development deals. Such arrangements don’t account for shifting market conditions, changing user behaviors, and the final response to the finished product.

You fight your corner, and the SaaS application development company fights back to retain its margin. Meanwhile, the software you invested in so heavily is rudderless. And the longer the situation persists, the more damage is done to your brand and the trust of your customers.

According to a study by Palgrave Macmillan published in the Journal of Information Technology, “rigid structure” software projects face budgetary overspends of up to 80%. So, what might seem like an approach to SaaS software development that offers certainty actually delivers the opposite.

How to Fix It

The good news is that all of this is avoidable, but you have to make the right decisions right at the beginning of the process. Outcome-based SaaS development is your best option.

Break down your project into smaller, more manageable “runways.” Choose a respected SaaS application development company, and they’ll guide you through the process. Put simply, however, it involves agreeing on a staged payment model that releases payments when nominated metrics move.

Decide very early on what the ultimate goals of the project are. Sign-ups? Improved user experience? Reduced churn? Higher revenues? When the metrics move in the right direction, you release the payment, and the developer moves on to the next phase.

This approach allows for a fluid scope that can change course quickly and adeptly. After all, results are everything – how you get there is best left open.

Feature Bloating and Scope Expansion

Let’s take a quick look at Salesforce – the world’s most popular enterprise SaaS platform. It started life as a much simpler Customer Relationship Management (CRM) platform. Once the core functionality was perfected, the developers slowly added features based on customer feedback and the application’s overall performance.

Do you think Salesforce would be the Enterprise Resource Planning (ERP) tool it is today if it had thrown everything but the kitchen sink at its first launch? Probably not. Certain features wouldn’t have worked as expected. Others wouldn’t have connected with users. The cost of changes, debugging, and marketing for potential relaunches would have been considerable. And who knows what reputational damage would have been done?

But Salesforce took a more pragmatic path to global dominance.

Feature bloat isn’t a side effect – it’s the default outcome when developers are paid for hours or fixed scope instead of results.

How to Fix It

Avoid the temptation to dominate your sector with the first version of your SaaS platform. Perfection takes time – although there’s no such thing as the perfect software solution in our experience.

The scope of your platform’s first edition should be limited but highly focused. Even then, you should break down the project into smaller deliverables. Once you have a product that is giving users what they want while delivering sales, you’ll have the resources and information you need to build on the success you’ve already achieved.

From that point on, every new feature or change must clearly show that it will improve one of the key performance metrics you’re chasing.

Rome wasn’t built in a day, and neither was any successful SaaS platform. Ever.

A Lack of Communication and Collaboration

One of the biggest silent killers of SaaS projects is poor communication between the client and the development team. While opting for outsourced SaaS product development services makes operational and economic sense, a productive working relationship between everyone involved is essential.

The Standish Group’s CHAOS Report identifies communication-related issues as the leading causes of project failure. Communication alone isn’t enough. Ask the experts for their input. Ask them to explain their choices. And don’t be afraid to have your say. While SaaS developers know what they’re doing, no one knows your customers like you!

You might have a crystal-clear vision in your head, but if that vision isn’t translated into detailed user stories, regular feedback loops, and shared dashboards, the final product will inevitably drift away from what the market actually needs.

Developers end up building what they think you want, while you’re left wondering why the platform feels “off” when it finally launches.

How to Fix It

Don’t look upon your SaaS development team as a vendor – look at it as a strategic partner. Both your fortunes should be intertwined. When the SaaS platform succeeds, everyone gets paid.

Work together like colleagues. Get to know one another by name. Hold regular catch-up sessions, even when you think they’re not needed.

All of these measures combined will ensure decisions aren’t made in silos, feedback doesn’t arrive late, and technical debt (problems that require time and resources to put right) doesn’t accumulate.

Take the time right at the beginning of the process to find an SaaS development company that shares your approach. Check their body of work, and look for reviews of their work. But before you do anything, sit down with the developers to see if everyone is on the same page with regard to the vision.

Effective SaaS Development Is Just a Consultation Away

Ready to become one of the 10% of SaaS founders that deliver long-term success? Book a free strategy call with our SaaS development experts today, and let’s create something special together.