From Internal Tool to SaaS: A Guide to Custom Back Office Software

Modern businesses rely on back office software applications to streamline operations, from finance and HR to inventory and customer support. These tools are the backbone of day-to-day business activities.

Consider your business. Maybe you’re relying on spreadsheets or using an existing SaaS product that doesn’t quite fit your unique business needs. It’s frustrating when no available software matches your workflow, and changing your entire process to fit a software is just impractical. So, you turn to custom software development to help streamline your business workflow.

Chances are, if you’ve struggled to find an application matching your business needs, other companies are in a similar boat. If you plan on building an application for your business, there’s a potential that other companies may benefit from the same application. Maybe you could create a Software-as-a-Service (SaaS) application used internally and licensed to other companies. If successful, this SaaS application could help recoup some of the development costs for your application or even become profitable.

Another option might be to initially develop the first version of the application for internal use and then convert it to a SaaS product in later phases of the project.

The development approach differs significantly depending on whether the back office software is custom-built for a single company’s internal use or as a SaaS product. In this blog, we’ll explore the key differences between these two approaches and what it takes to transform an internal-use application into a marketable SaaS solution.

Key Differences Between Internal-Use and SaaS Custom Back Office Software Development

When deciding between custom software development for internal use or as a SaaS product, it is important to understand the key differences. These differences significantly impact the effort (cost) required to develop the application.

User Base and Scalability

• Internal Use: The application is designed for a single company, often with a well-defined number of users. Performance optimization is focused on the specific needs of that company, without the need for complex scaling.
• SaaS: The application must support multiple companies, each with potentially thousands of users. Scalability is a major concern, requiring cloud infrastructure and multi-tenant architecture. The cloud implementation must dynamically scale to meet the varying requirements of multiple companies using the application. The load on the application will vary greatly based on the location (time zone) of the companies utilizing the application. Peak load on the application can also be affected by the business’s fiscal calendar. For example, end-of-quarter reporting can generate a large draw on computing resources. See my previous article, Will It Scale, for a deeper dive into the importance of software architecture.

Customization and Configuration

• Internal Use: The back office software is typically tailored to the company’s specific workflows, with hardcoded business rules and minimal need for external configuration. When building an application just for your company, you only need to consider your business process and workflow. You can make sure the application matches your processes closely.
• SaaS: When building a SaaS application, you must consider that your users’ business processes might differ from those of your company. The product must be highly configurable to accommodate diverse customer needs. This requires a flexible architecture with configurable workflows, role-based access control, and customizable dashboards.

Security and Compliance

• Internal Use: Security measures are designed to meet the specific company’s IT policies, and compliance requirements are limited to the company’s industry regulations.
• SaaS: The platform must adhere to industry-wide security and compliance standards (e.g., GDPR, SOC 2, HIPAA). Strong authentication, data encryption, and role-based access control become critical.

Deployment and Maintenance

• Internal Use: The back office software is typically deployed on the company’s private servers or a simple cloud architecture sized to meet your company’s current demands. Dynamic scaling is more of a nice-to-have, rather than a need-to-have, as the increase in load is more predictable. Updates and maintenance are controlled internally.
• SaaS: The application is hosted in the cloud, requiring robust DevOps practices, CI/CD pipelines, and frequent updates to ensure continuous improvements and security patches. The environment must dynamically scale to meet unexpected loads. Service availability is a key consideration as well, as it may prevent the ability to schedule maintenance. (Unsure what DevOps is or why it’s important? Check out my article on the basics & benefits.)

Pricing and Monetization

• Internal Use: There is likely no monetization.
• SaaS: Monetization is based on subscription models, often including tiered pricing based on features, number of users, or usage limits. You must be able to take payment, which means integration with a credit card processor, a UI for clients to manage their subscriptions, and revenue reporting. There is also the accounting that goes along with running a business to support the sales of the application.

Support and Customer Success

• Internal Use: Support is handled by an internal IT team, with direct access to developers for issue resolution.
• SaaS: Requires a dedicated customer support and success team, with comprehensive documentation, training resources, and 24/7 support options.

Marketing

• Internal Use: Not really necessary
• SaaS: A marketing website will be necessary to promote the SaaS product. The website will need content, calls to action, SEO, and a means for users to purchase subscriptions and check out.

Transforming an Internal-Use Back Office Software Application into a SaaS Product

When considering developing a back-office application for internal use with the potential to evolve into a SaaS product, there are a few key factors to keep in mind. Some of these items can be added in later releases without too much trouble. However, others need to be considered from the start as they are more difficult to add in later releases if the application was not initially architected to support them.

Plan for Multi-Tenancy

If your application is developed for internal use at the start, it will probably have a single-tenant architecture. This means it was designed to serve only one company.

To become a SaaS product, it must support multiple customers securely. This involves implementing a multi-tenant architecture where each tenant’s data is isolated but served from a shared infrastructure.

It’s best to plan for multi-tenancy from the start. While it’s possible to re-architect an application to add support for multiple tenants, doing so can be difficult and complex, depending on the application type.

Scale Hosting

For an internal application, your hosting environment only needs to support the expected load from your company. This load is typically predictable, and you don’t need to scale quickly. The application could be hosted locally or in a simple cloud environment.

An on-premises or single-company cloud setup won’t work for SaaS. Migrating to a cloud provider like AWS, Azure, or Google Cloud ensures scalability, reliability, and global availability. More importantly, the cloud environment must dynamically scale to meet unexpected user loads and provide consistent response times for a good user experience.

Implement Subscription Management and Billing

You’ll need a way to manage user subscriptions, payments, and pricing tiers. SaaS platforms often integrate with billing solutions like Stripe, Chargebee, or Recurly for automated payment processing. This will need to be added to the application, as well as the ability to control access to the application based on subscription status.

This should be considered from the start, as adding controls to manage application access based on a subscription status can require refactoring if added in later releases.

Enhance Security and Compliance

A SaaS product must follow strict security protocols. Implement robust authentication (OAuth, SSO, MFA), encrypt sensitive data, and ensure compliance with global regulations like GDPR and SOC 2.

Build Self-Service Capabilities

Internal applications often rely on IT support for configuration. A SaaS product should provide a user-friendly admin panel for self-service account management, role-based access, and workflow configuration.

Developing a Customer Support Strategy

SaaS users expect responsive support, documentation, and knowledge bases. Consider setting up ticketing systems, chatbots, and dedicated customer success teams.

Implement Continuous Delivery and Monitoring

Unlike an internal application with occasional updates, a SaaS product requires frequent releases and proactive monitoring. Set up CI/CD pipelines, automated testing, and performance monitoring tools like New Relic or Datadog. You’ll also want to consider containerizing the application and automating the update deployment process to reduce the chance of updates causing unexpected downtime.

Market and Acquire Customers

Shifting from an internal tool to a SaaS business requires a go-to-market strategy. Invest in digital marketing, SEO, and sales efforts to attract users. Leverage testimonials from the original internal company to add credibility. A website to promote the application will also be required.

Anything is Possible with Custom Software Development

Turning an internal tool into a successful SaaS product doesn’t happen overnight, and trying to build both at once often leads to costly mistakes. A better approach is to first focus on building a functional internal tool that meets your business needs. From there, it’s easier to make an informed decision about whether to transition to a SaaS model.

While the process can be challenging, with the right strategy, thoughtful planning, and an experienced technology partner, businesses can confidently take the next step towards transforming their custom internal software into a SaaS product. While re-architecting or re-integrating the system may be necessary, this staged approach is often more realistic than trying to scale prematurely. By focusing on scalability, security, self-service, and customer support, businesses can successfully make the leap from internal software to a thriving SaaS company.