Featured Article from Software Licensing

Enterprise SaaS Vendors Need Flexible Licensing Models

February 16, 2017



Enterprise technology vendors selling software-as-a-service (Saas) solutions are in an interesting position. The SaaS (News - Alert) model has some inherent flexibilities and advantages from a pricing and licensing perspective, but also creates challenges over traditional software licensing models.

According to Flexera Software, a company that specializes in software licensing and monetization, most enterprise SaaS solutions are priced based on the number of users, typically for a one or three-year term. That puts the buyer in the interesting position of having to estimate how many users they will have during the contract term, allowing for fluctuations like company growth and increased adoption of the SaaS offering during the given timeframe. If that number should change, it puts both the enterprise buyer and the SaaS vendor in a tricky position.

Unfortunately, when enterprises end up using more licenses than they have paid for, a large percentage of SaaS vendors fail to notice and therefore end up giving away free product. Some vendors do put a cap on the number of users and simply don’t allow additional users accounts to be created, while others charge an additional fee for each user exceeding the negotiated number. Equally tricky is when enterprises end up using less licenses than they have paid for. The SaaS vendor typically wins in this scenario, but runs the risk of alienating the enterprise customer if they feel they have overpaid for the solution.

The reality is that most enterprises do end up purchasing more user licenses than necessary to be on the safe side, creating “shelf-ware.” A comprehensive software asset management (SAM) solution can track users and licenses, preventing enterprises from overpaying and underutilizing their SaaS solutions. SaaS vendors can be proactive about this situation as well, by implementing a different type of pricing model. For instance, in a traditional software sale, solutions are sold per device, whether they get used or not. This scenario also creates shelf-ware, leading some traditional software vendors to migrate to a floating or concurrent license model that tracks the number of users using an application simultaneously, regardless of the number of installations.

SaaS vendors can offer similar pricing, charging enterprise customers based on the number of concurrent users within the contract term as a baseline. Customers would also agree to pay for additional users beyond the baseline, either on an hourly, daily or monthly basis. Vendors would also offer visibility into the number of users and show their customers trends and audit trails to ensure accountability.

By creating more flexible and elastic pricing models, SaaS vendors can glean more value from the pricing and licensing of their offerings while also giving their enterprise customers more agility and value.




Edited by Maurice Nagle
Article comments powered by Disqus


Free Trials

See For Yourself Why So Many Trust Flexera Software Solutions

Featured White Papers / eBooks

Report: Software Licensing 2016: Seismic Shifts - Shaky Foundations

Report: Software Licensing 2016: Seismic Shifts - Shaky Foundations
Key Trends in Software Pricing & Licensing Survey - 2016 Report...

eBook: How Can You Monetize the Internet of Things?

eBook: How Can You Monetize the Internet of Things?
This eBook provides 5 tips for leveraging your intelligent devices and apps to gain higher revenues, competitive advantages and lower costs as well as discusses software monetization and licensing use cases and success stories...

eBook: 10 Reasons to Buy a Purpose-built Software Monetization Solution

eBook: 10 Reasons to Buy a Purpose-built Software Monetization Solution
Read this eBook that arms you with 10 reasons to buy - and not build - that can be used to develop the business case for leveraging a commercial Software Monetization solution...

eBook: How Do I Transform My Hardware Business and Supply Chain Processes to Support a Software Business?

eBook: How Do I Transform My Hardware Business and Supply Chain Processes to Support a Software Business?
This eBook discusses the hardware to software shift, the changing business requirements for successfully managing a software business and provides guidance on next steps...

Featured Press Release

Featured Webinars

Networking Leader Shares Why Transforming their Business was Key to Leveraging NFV Market Trend

Networking Leader Shares Why Transforming their Business was Key to Leveraging NFV Market Trend
Attend this webinar to hear Richard Jenny, Director of Program Management and DevOps with ADVA Optical Networking discuss why they decided to leverage a Software Monetization platform instead of building their own software licensing, entitlement management and software update solution.

Expert Panel: Software Monetization Trends and Best Practices with IDC and Flexera Software
Join Software Monetization experts as they share predictions and best practices on the topics that are driving transformation in the technology industry. If you are a software vendor looking to adopt new subscription, usage and outcome-based business models or a device manufacturer looking to monetize your software and establish recurring revenue models, this panel discussion will address all these issues as well as the impacts of cloud, virtualization and IoT.

Webinar: Software Monetization Maturity Model - How to Get Your Organization to the Next Level
Application producers are faced with many challenges as they try to grow revenue and streamline back-office processes, and those that are thriving have adopted a strong and well thought out software monetization strategy