Many, if not most Software-as-a-Service (SaaS) offerings are typically offered using a named-user license metric and a subscription license model. Salesforce.com is the most popular example of this approach. But SaaS is really much more than a license model because:
- Offering your software in a SaaS model usually provides faster time-to-benefit, especially for enterprise software as configuration costs can be reduced through more standardized workflow templates and eliminating the need for complex software installations and in some cases, customization.
- SaaS reduces upfront software and hardware capital expenditures (CAPEX) and ongoing maintenance costs and replaces it with a predictable operating expense budget (OPEX), which many software users find attractive.
- Corporate risk for compliance is reduced as provisioning to the service is typically managed by the SaaS provider at the point of access.
However, I often hear SaaS described only in the context of the named-user, subscription license model. This perception does bring up a few interesting points about SaaS and license models in general:
- Subscription license models are widely adopted for traditional desktop, enterprise, and device management software, with adoption increasing. There’s no need to wait for a SaaS deployment of your software if the benefits of a subscription license model.
- SaaS offerings are moving beyond the single subscription-based named user license model into models based upon capacity used (storage) over a period of time, and, also to concurrent user models, where pricing is based upon the maximum number of concurrent users that can access the software in a time period. We’re helping a company with such a deployment. Other companies use more granular transaction-based pricing (Travelocity or Expedia’s booking fee is a good, simple example).
- As I’ve blogged before, I think the train has left the station on the widespread adoption of pay-per-use license models for common desktop and enterprise software. However, as end-customers embrace SaaS offerings and paying for their software as a service, there will be more license model innovation with SaaS offerings. But, most software ISV’s do offer their software to some percentage of their customers using a form of a usage based model. “Remix” which I described in an earlier blog, is one such sample.
So, if you’re think that a subscription license model works for your customers, then don’t wait for SaaS.
And, if you think that a SaaS deployment makes sense for the use of your software, then don’t think you have to use a subscription- based, named user license model.