Some Thoughts on SaaS Pricing
I have been a member of LinkedIn, the Professional Networking Site, for some time. I have joined several groups that compliment my background and/or can increase my understanding in my particular area of practice. I have found one group, Software Licensing Professionals, to be particularly helpful. There is one relatively new discussion started by Michelle Nerlinger,Sr. Product Marketing Manager, SRM Solutions at SafeNet, Inc., entitled SaaS v Software: Their Licensing Needs to be Integrated. I was very impressed by the comments from all the discussion participants. Their comments are evidence of each person’s vast experience in this area and the trials and tribulations they have experienced while we all take this journey into the world of SaaS. The one overriding issue in this series of comments, as well as in my many readings on the topic, is pricing. The concept of pay-as-you-go just hasn’t crystallized and many vendors have resorted to a sort of subscription model, if the customer can indeed make use of the model. I came across one very informative comment by one of the discussion participants and I want to share it with you. I want to give full credit to its author David Ochroch, Information Technology Strategic Sourcing Consultant and Manager. His comments on SaaS pricing are as follows:
“Most pricing for SaaS follows a per-user model because that tracks directly to web-based access rights. A number of on-premise apps can price per-user...and as long as the software is a true user-based application, a per-user model works well as a value indicator. The per-user pricing model starts to break down in (at least) two cases: 1) where the app can't readily define or track users; and 2) where the app is used very rarely or primarily during peak times. Software with those latter attributes are usually sold on some other basis (per server, per processor, etc.). From my experience, software with those attributes (e.g., databases, middleware, security monitoring, transaction processing) often resides on-premise for performance reasons -- and I don't see SaaS being widely used in those areas for some time. I'm suggesting that there won't be a one-size-fits-all licensing model for either SaaS or on-premise but there should be commonality in the licensing metrics between the same SaaS and on-premise software versions.”
