Information Technology Reference
In-Depth Information
(CRM Landmark, 2009). The last three types of
cost refer mostly to software for vertical needs.
All these costs are determined in SLAs that define
the pay-on-demand rates.
Defining the billing model of SaaS is a chal-
lenging task for potential customers, providers
and Independent Software Vendors. Many Inde-
pendent Software Vendors (ISVs) have developed
their SaaS solutions offered in parallel with the
corresponding commercial products. Among
the challenges ISVs are confronted is the re-
structuring of pricing models. In order to establish
attractive pay- as- you go subscription fees, the
understanding of the differences in cost between
software products and services is required. These
differences need also to be clearly presented to
candidate customers.
Major SaaS providers bid very low prices hop-
ing that perpetual licensing will lead to upfront
earnings. SaaS providers usually provide scalable
types of licensing based on the number of users
or on the number of applications accessible to the
user. One pricing model may not be appropriate
for all types of applications and software services.
For example, eCommerce or supply-chain SaaS
solutions could be priced based on the number
of transactions or volume of data transmitted.
Customer relationship management (CRM) or
Salesforce Automation (SFA) solutions can be
priced based on the number of accounts, prospects,
or bookings they support. Determining customers'
price-sensitivity when it comes to SaaS is espe-
cially difficult for providers who need to balance
their new solution pricing against existing product
pricing schedules. (Le Cayla, 2006).
SaaS providers are faced with the problem
of metering and billing their services in order to
establish competitive offers that will at first attract
potential customers, and offer long term benefits
to both of the two parties. A provider is faced with
the following three problems:
•
Should process and ratings be flexible per
customer? Per contract?
Answering the first question we can say that
the relevant data collected so far by providers
generally falls into three categories, resource data,
transactional data and workflow data.
Resource data most of the times describe the
customers usage of the premises offered by the
provider. Relevant data that can be recorded is
the number of users, or connections to the ap-
plication that can be 'per use' or per 'concurrent
use'. The number of registered users of a product
per month is an increasingly popular method of
pricing SaaS. SalesForce, (2010) is a major SaaS
provider that use among others this model for most
of its offerings. This billing model has different
prices for each level usage based on the number
of users. The payment per user is appropriate for
software that serves internal needs of the custom-
ers company. In that case the customer needs to
isolate and record the number of employees that
will actually utilize the SaaS software. The number
of registered users is a good indicator of the value
that a group derives from the product (Rothbart,
2009). Risks deriving from this method involve
possible user's abandonment. The customer com-
pany needs to control, manage and remove users
that do not regularly use the software.
Another way of pricing resource usage is
based on per- user page view fees counted as the
number of users that access a page. This kind of
pricing model is mostly appropriate for products
that are destined for large external customer and
partner communities. In that case, the number of
users that access and browse a website is recorded
as the basis to charge customers. Theoretically
this metric is indicative of the number of users
that visit a website and actually may use or buy a
product, but still there is no guarantee that a high
page view presents the proportional benefits to
the SaaS customer and its clients. The page view
does not always reflect how much users are using
a product. The “concurrent use” on the other hand
•
Which usage data to collect and record?
•
Based on which metrics to charge?
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