- Simplicity of SaaS model puts the focus back on user based pricing. Cost per user per month highlights the elegance of simplicity. Business leaders easily understand pricing by users and not by revenue or their business success. Why should you pay a software vendor more for your success?
- Inclusion of maintenance, support, and upgrades raises the bar. Unlike traditional models which tack on 15 to 25% in annual maintenance costs and may or may not include the apps and technical foundation upgrade, SaaS pricing eliminates this level of complexity. Users neither worry about the cost of upgrade nor worry about the testing and certification costs.
- Current systems nearing the end of their life-cycle provide enterprises a fresh start. Many ERP systems installed pre-Y2K are now coming up on replacement. Enterprises emerge from harsh lessons, as they have paid for maintenance of unused licenses (i.e., shelfware), suffered undefined maintenance fee increases, and lost functionality credit for future releases. As companies begin their vendor selection processes, they do not want to repeat the same mistakes. SaaS pricing simplicity allows them to limit their risk while gaining the benefits of rapid deployment.
The bottom line
Though the simplicity and elegance of the model may not apply to all scenarios, prospects and customers should consider how to apply SaaS pricing models to traditional licensing and pricing contracts. Armed with this metric, a lot can be gained from limiting the cost of IT to the number of users. And thanks to SaaS, the only thing that matters is cost/user/defined time period.
(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved