How to Grow SaaS Revenue, Profits and Market Share with Use-Appropriate Software Licensing and Pricing
A SaaS Business Models White Paper
The initial wave of software-as-a-service (SaaS) was characterized by “one-size-fits-all” pricing. This was largely because SaaS vendors were out to pioneer a new market—and simplicity was a cornerstone of their pitch to early adopters. The offer of extremely simple and economical pricing helped these vendors overcome whatever resistance they may have encountered to a new and unproven model for software delivery.
With increasing adoption of cloud services, the SaaS marketplace has changed dramatically. SaaS and other on-demand models have now been fully embraced as compelling alternatives to traditional on-premises software deployment for many reasons. These reasons include reduced total cost of ownership, faster time-to-benefit, greater flexibility to increase or decrease capacity, and easier delivery to remote, mobile and/or third-party users.
To survive and thrive in an everything-as-a-service marketplace, SaaS vendors must be able to quickly respond to shifts in customer expectations and competitive landscapes. One-price SaaS limits revenue, market penetration and competitive strategy. Every SaaS vendor should therefore take steps now enable use-appropriate models for software licensing, bundling and pricing.
SaaS vendors that fail to evolve past a one-price model will continue to miss out on revenue opportunities. Those that adopt use-appropriate pricing, on the other hand, will grow revenue, margins, and market share. They will also be better equipped to use pricing as a strategic competitive advantage as the global SaaS market continues to grow and mature.