What Is SaaS Architecture? 10 Best Practices For Efficient Design

As an engineer, engineering supervisor, or CTO, you are responsible for making architectural decisions that help your team create innovative products and optimize technology costs.

The type of architecture you select affects how much control you have over data, infrastructure, and customization options. The Software-as-a-Service (SaaS) model is one of the major architectures you can use to deliver services to customers — anytime and anywhere.

In addition, SaaS eliminates the maintenance work that comes with locally installed software, such as purchasing, installing, and maintaining it. However, what is SaaS architecture and why are more companies switching from on-premises to hosted applications?

Let’s begin by defining SaaS architecture and how it works, irrespective of your role and then cover 10 best practices to ensure efficient and cost-effective SaaS architecture design.

Table Of Contents

What Is SaaS Architecture?

In SaaS architecture, a vendor hosts an application on a remote server and then delivers its capabilities over the Internet to an organization’s end users.

This model allows multiple organizations to share a single model and a single configuration. The organizations access the same hosted application, including the same hardware, operating system, network, and other components.

An organization can use the architecture as-is. Or, its engineers can employ an Application Programming Interface (API) to customize the SaaS with in-house or third-party tools in order to meet its software needs.

Users are required to pay a recurring subscription fee to access the “ready-made” SaaS solution. They do not purchase a full copy in advance or install the software on every computer locally as it was traditionally done.

In addition, the SaaS vendor handles all technical issues, including hardware, updates, data storage, middleware, and infrastructure security.

SaaS differs from both Infrastructure-as-a-Service (IaaS) and Platform-as-a-service (PaaS):

Examples of IaaS include Amazon Web Services (AWS), Digital Ocean, and Microsoft Azure.

Examples of PaaS include Red Hat OpenShift, AWS Elastic Beanstalk, and Force.

In both, the cloud service takes care of many backend tasks such as platform- and infrastructure-level security, updates, backups, server software, and operating systems.

What Are The Key Principles In SaaS Architecture?

The key principles of SaaS architecture design include scalability, reliability, availability, security, and performance. There are more SaaS design principles you can consider, including the ones provided by the AWS Well-Architected Framework for SaaS applications.

Here’s a quick summary of the main principles of SaaS architecture design.

Support business goals

SaaS architecture design should support business goals and objectives. This means that the architecture should be designed to meet the specific needs of the customer. The goal of any business is to derive value from meeting its customers’ needs, so the features of a SaaS architecture should be tailored to the customer’s needs.

Prioritize minimum viability

SaaS should prioritize minimum viable product, meaning that the architecture should be designed to quickly deliver core features and functionality at the highest possible level of quality and robustness, while having the capacity to add features in the future.

This helps to minimize the complexity of the architecture and also the cost of development, deployment, and maintenance. This approach also ensures that the product can be launched quickly to the market and then incrementally improved over time.

Scalability

SaaS architectures should be scalable to support a growing number of users and data. This means that the architecture should be able to handle an increasing number of users and data without experiencing performance degradation.

For instance, the architecture should be able to automatically add resources to handle more user requests, or to store more data, without requiring manual intervention or the need to migrate to a different platform.

Reliability

Reliability refers to the ability of the system to provide consistent performance in terms of quality, availability, and speed.

SaaS architecture design should focus on ensuring reliability and availability around the clock. This means that the architecture should be designed to minimize downtime and ensure that users can access the application when they need it.

For instance, a good hosted application should be designed to detect and fix problems quickly, and the appropriate amount of redundancy should be built in to ensure there is no single point of failure.

Security

Security ensures the system is protected from unauthorized access and data loss. This means the architecture should use appropriate security measures to protect user data from unauthorized access, use, disclosure, disruption, modification, or destruction.

Here’s an example. Using microservices architecture instead of monolithic architecture can help reduce the attack surface and make it easier to apply security updates to only the affected components.

Performance

SaaS architectures should be performant to provide a good user experience. Performance refers to the speed and efficiency of the system in delivering results. This means that the architecture should be designed to deliver a fast and responsive user experience.

Consider these examples. The architecture design should minimize the number of requests between the client and the server, use caching to reduce latency, and use a content delivery network to improve response times.

Manageability

SaaS architectures should be easy to manage and maintain. It should be designed to be easy to configure, update, and troubleshoot. In addition, the design should be flexible enough to accommodate changes as your business needs evolve.

It should also isolate all tenant resources. Finally, it should provide visibility and control over who has access to what data.

Cost-effectiveness

SaaS architectures should be cost-effective to operate and maintain — at least compared to IaaS and PaaS offerings. It should be designed to be efficient in terms of resource usage and associated costs.

For example, Amazon Web Services (AWS) SaaS offerings such as Amazon Connect, which is a cloud-based contact center service, are much more affordable than developing an in-house contact center.

Customizability

The SaaS model aims to reduce the burden an organization has to manage its architecture. Yet, there’s no one-size-fits-all SaaS architecture, so the design should enable users to customize the system to their needs.

This can be done through the use of APIs or other methods that allow users to tailor the system to their individual requirements. Lastly, SaaS architectures should be easy to use and self-service capable so users can quickly get up and running without needing to seek assistance.

Testability

The principle of testability in SaaS involves balancing testing and quality assurance processes for all tenants and individual users.

On one hand, you want to apply tests and QA processes across the entire SaaS application instance, not just individual tenants. On the other hand, you know that all your users do not fit in the exact same user profile.

Besides, you may want to perform tests on a single tenant architecture before it is deployed on a multi-tenant architecture, ensuring it is operating efficiently and error-free.

Compatibility

It is crucial to ensure that the SaaS architecture design is compatible with different types of users, different devices, and different system configurations. This ensures that the software works properly for all users and all devices, regardless of their environment.

Besides supporting various third-party integrations, the architecture should also enable users to integrate their favorite or existing solutions.

By following these SaaS architecture design principles, you can ensure your SaaS implementation meets your users requirements.

Single-tenant Vs. Multi-tenant Architecture

In a single-tenancy model, a single instance of the application and its supporting components (database and infrastructure) are dedicated to serving a single customer/user/tenant.

However, a multi-tenancy model refers to a single SaaS application instance and its supporting framework serving multiple users, customers, or tenants at the same time. It is also known as a ‘one to many’ SaaS architecture.

You can learn more about the advantages and disadvantages of single-tenant and multi-tenant cloud architectures here.

Next, we’ll focus on why you’d want to use SaaS architecture to deliver services instead of using an on-premises approach.

SaaS Vs. On-Premises Architecture: Why Use The Hosted Software Approach Over The Locally Hosted Model?

On-premises architecture uses local hardware or a local data center to host a third-party application. You are responsible for provisioning technical requirements for the app, such as data storage and updating both the hardware and software.

You are also responsible for designing and developing supporting infrastructure, such as networking and databases.

With SaaS architecture, the vendor handles these often time-consuming tasks on your behalf. So you can spend less time creating infrastructure from scratch or fixing issues yourself, and more time optimizing the features that your customers actually use and want.

What Are The Advantages Of Deploying SaaS Architecture?

Here are some of the advantages SaaS architecture:

SaaS architecture allows you to create cost-effective software that won’t turn your finance team’s blood cold. Although it offers many of its benefits “out of the box”, there are some best practices you’ll want to follow to make sure you always run an optimal SaaS environment.

10 SaaS Architecture Best Practices to Implement Now

Here are some actionable tips and best practices for SaaS architecture.

1. Leverage microservices vs. monolithic architecture

Some developers swear by the monolithic architecture approach. The thinking is that if you layer a monolithic application, you can build, patch, or change it without affecting the entire application.

If you’re not planning on creating a full production environment, using a monolithic approach could make sense. However, opt for a microservices architecture if you anticipate growth since making changes later is often tricky.

Microservices architecture helps structure decoupled applications into a collection of data and services. You can write, deploy, test, and patch each service independently.

You can also focus each microservice on a single business offering. Take the most successful streaming service, for instance.

Netflix uses different microservices for billing, analyzing watch histories for movie recommendations, identifying devices to optimize viewing experiences, and adding copyright markings to all files.

Using microservices, different teams can manage independent services, code each in a different language, and deploy each on different infrastructure. For these reasons, using a microservices architecture facilitates scalability, continuous development (CI/CD) practices, and isolating problematic areas without changing an entire application or shutting operations down to fix it.

2. Enable self-service and customization

Users should be able to manage your SaaS solution themselves, so they aren’t forced to hire specialists. You need to allow internal or external users to customize a SaaS solution based on their own needs without writing code.

Provide easy-to-use APIs in your SaaS architecture so users can customize the platform more flexibly. Don’t forget to provide thorough documentation as well.

By allowing them to integrate the tools they already use or want to use, they can reap more value from your SaaS architecture. You can also host popular bots by default — such as Slack.

3. Build multi-tenant

You can share computing resources between multiple customers by leveraging a multi-tenant architecture. There are fewer instances of resource underutilization in a multi-user environment than in a single-tenant environment.

There are two ways to implement a multi-tenant approach:

Suppose you have heavy users whose workload hogs most of your resources. In that case, you may need to use a single-tenant approach. Such users may degrade other tenants’ user experiences in a multi-tenant environment.

If you are unsure which users take up the most resources, you can use a cost intelligence solution like CloudZero to monitor which customers cost you the most to support. You can even track costs daily per customer per feature.

With CloudZero cost per customer visibility, you can decide if you should raise your service fees to afford a single-tenancy approach or to remain profitable.

4. Design SaaS with data security in mind

Most organizations opt for a monolithic or on-premises architecture out of concern for losing control over their data. Data breaches are such a major concern that more organizations than ever plan to invest in cybersecurity to prevent costly breaches.

Making Role-Based Access Control (RBAC) a core component of your SaaS architecture can help improve data security. RBAC is a data access control method that restricts different users from accessing and changing data that does not directly relate to their role in an organization.

RBAC lets users designate administrators, vendors, end-users, contractors, etc. Setting roles by job competency or authorization is also possible.

5. Build regulatory compliance into the SaaS

Ensure you build your SaaS application with compliance regulations built-in if you offer a vertical SaaS architecture, an application for a specific industry. Keep in mind that while some policies are industry-specific, others apply across the board, such as the General Data Protection Regulation (GDPR).

7. Make scalability a part of your SaaS architecture from the start

As your SaaS application grows in popularity, it should be able to scale. A growing business generates increasing transactions, queries, and metadata.

This requires that you design the SaaS architecture to autoscale easily and handle the increasing load without deteriorating performance. You can achieve this by ensuring the SaaS architecture supports seamless horizontal and vertical scaling.

8. Ensure minimal downtime

Develop a SaaS solution that is highly available. Users of SaaS solutions seldom tolerate downtime. They know that lengthy service outages reduce customer satisfaction, resulting in losing customers, business, and their competitive edge.

SaaS application users also expect to receive properly tested updates and assistance whenever they contact you with a problem.

9. Address vendor-lock-in concerns

Vendor lock-in refers to the unfortunate situation where an organization finds moving from one vendor to another is extremely difficult.

One way to ensure your SaaS application puts users’ vendor lock-in concerns to rest is to make it supports standard integration APIs, so users are free to connect the solution with other SaaS or on-premises applications.

That way, users can add capabilities to the SaaS application instead of switching to another vendor. This multi-service approach can enable users to innovate without continually changing vendors.

10. Implement cost monitoring into your SaaS applications

A multi-tenant architecture is often an economical approach, but costs can quickly accumulate as you add more users. The approach can make this easy to overlook because a single database manages data for multiple tenants, reducing visibility per tenant.

Tracking the SaaS costs you incur is essential to ensure that your architecture decisions don’t eat into your margins over time.

If your cost visibility is good, you can tell a lot more than the total number of instances you spin up in a given period.

With a tool like CloudZero, you can track SaaS architecture costs by customers, products, teams, and units within your company. You can determine who your most profitable customers are with CloudZero since it shows your cost per customer.

In addition, you can see which customers you spend the most on so you can adjust your SaaS pricing to maintain healthy margins.

It also allows you to see what feature takes up the bulk of your cloud budget. Based on how much your customers use it, you can either keep it as is or decommission it to satisfy the Rule of 40.

You can still use CloudZero to calculate how much you spend on supporting internal and external users.

You can plan and allocate your SaaS architecture budget more accurately when you know the mean cost per customer over time.

Then, you can determine how SaaS costs change as your customer base grows. Therefore, your engineering team can be well equipped to predict when they may end up going over budget, thereby avoiding overspending.

Additionally, finance can tell where and how cloud spend is going to measure ROI over time more effectively.

Here’s something else.

Some companies today find it difficult to distinguish between SaaS and other kinds of cloud computing architecture.

What Are Some Of The Best Examples Of SaaS Architecture In Action?

Examples of SaaS architecture in action include popular applications such as Microsoft Office 365, Adobe Creative Cloud, Slack, Salesforce, QuickBooks Cloud, Dropbox, and Google Workspace. These applications are often hosted in the cloud, and users pay a subscription fee to access them.

Also, the services provide users with access to software, data storage, and other services in the cloud. This eliminates the need for the users to install and manage software on their own computers or data centers.

Here’s a quick look at some of the best examples of SaaS architecture in practice today.

Netflix architecture

Netflix’s architecture design is based on the principles of scalability, reliability, and availability. It also utilizes microservices and distributed computing to provide a seamless user experience. In addition, Netflix also utilizes caching and content delivery networks to reduce latency and improve performance.

Check out our in-depth guide to how the Netflix architecture works here to find out more.

HubSpot architecture

HubSpot’s architecture relies on microservices. It leverages over 1,200 different web services in addition to “dozens” of static front-end apps.

These microservices are combined to create the products that our customers purchase. The majority of those web services are written in Java (via the Dropwizard framework). The front end is based on React in CoffeeScript and Backbone.

A single HubSpot team may own several services. Each service’s scope varies. Services communicate via RESTful JSON APIs or through a messaging system similar to Apache Kafka.

Twitter architecture

Twitter originally ran its public APIs using a single Ruby-on-Rails app. Updating it became increasingly difficult.

By 2014, Twitter switched to microservices. It migrated its API service to 14 microservices. This set ran on “Maccaws”, an internal Java Virtual Machine (JVM)-based framework.

But while this architecture supported faster development speeds at first, it also led to a scattered and disjointed Twitter API. This led to lower developer productivity. This is according to Steve Cosenza, Senior Staff Engineer at Twitter.

From 2020, Twitter’s public API platform, which is GraphQL-based, can scale to many endpoints. The endpoints could all be rolled out as new services are released. Instead of creating an HTTP API for every new functionality, Twitter developers can query and modify only the data they need.

Cosenza says this approach minimizes any specific endpoint logic within the core HTTP service. Otherwise, the system would quickly become another monolithic system that’s challenging to maintain.

Slack architecture

In late April 2023, Slack announced its next-generation platform was out of beta for developers.

The new platform helps developers create automations using “modular, shareable, and remixable” building blocks like functions, workflows, and triggers. These are remixable, repeatable, and hook into anything flowing in and out of Slack.

New tools, such as the Slack CLI and TypeScript SDK, streamline the laborious areas of building on top of Slack.

Slack-managed serverless infrastructure supports secure deployment, data storage, and authentication. The fast, Deno-based TypeScript runtime promotes a focus on the code and users.

In addition, you can share what you’ve built anywhere in Slack with a flexible user experience. You can share your workflow in a message, add it to your bookmarks, put it in a canvas, etc. by adding a link trigger.

These are just five examples of SaaS architecture implementations today. Discover how SaaS companies like Airbnb and Netflix optimize their SaaS infrastructure here to learn more tips.

CloudZero Helps You Understand Cost Per Customer In Multi-Tenant Architecture

When you use CloudZero, you can implement multi-tenant architecture without losing cost visibility. Our cloud cost intelligence platform helps engineering and finance align on cloud costs and gain better visibility into their SaaS COGS, unit costs, and cost per customer.

CloudZero also enables teams to drill into cost data from a high-level down to the individual components that drive their spend — and see exactly what cloud services cost them the most and why. Then you can tell exactly where to reduce usage to cut costs, or increase investment to maximize ROI.

We’ll also send you timely, noise-free, and context-rich cost anomaly alerts to help you prevent cost overruns, like this:

There is more to CloudZero.

With CloudZero, customers like Drift have saved over $3 million. Others like Demandbase have already justified $175 million in financing after reducing cloud costs by 36% in just one year. You can, too.

to see for yourself how CloudZero can help you control SaaS costs without making your head spin.