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Architectural ruminations

2. SaaS: Licensing

2. SaaS: Licensing

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One of the most defining characteristics of SaaS is probably that of licensing provided as a subscription-based model rather than the single up-front license fee sold for perpetual use as described by traditional software “products”.

This subscription model is most typically realised through a relatively simple time-based approach such as a monthly fee for example. However, in reality many SaaS providers quickly realise that there is a need to provide a far greater range of subscription models that may take on several combinations including:

·          Time-based subscription models

·          Usage-based transaction models

·          Features / function models

·          Allotted number of service transactions used

·          Advertising funded revenue models

This situation is further compounded by the fact that the SaaS provider, in the early stages at least is only just starting to understand what their core services are let alone how they are going to charge for it; all this is against a backdrop of heavy investment in the development of the functional aspects of the SaaS application itself. Invariably early adopters therefore benefit from being able to negotiate terms on an individual basis and as a result one should expected that this will set an expectation that will drive the need for great flexibility in subscription models at least in the medium term as the SaaS licensing landscape evolves.

A good analogy in thinking about SaaS licensing, which may in fact prove to be more than just an analogy, is to think of the subscription models used by the mobile phone companies. The guys have taken subscription to an all new level; providing a myriad of different plans and options that typically stem from a base fixed fee with a range of extended features and options; the key driver being the massively competitive landscape of the mobile phone market. It will be interesting to see how SaaS licensing models develop. At present the SaaS market is emerging and still uncluttered but given its global nature one could imagine a dramatic surge in “copy cat services” that in order to differentiate themselves and drive competitive advantage will look to introduce more flexible pricing models much as has taken place with mobile phones.

  • SaaS is a continually evolving mix of existing and emerging technologies and business models and as I

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