SaaS Billing and Pricing Models

SaaS pricing models typically bill clients using one of the following two metrics:

  1. Number of users
  2. Volume of resources consumed

Common SaaS pricing examples that use these metrics are further described below.

Pay-Per-User SaaS Pricing Model

Pay-per-user is the most popular SaaS pricing strategy. Under this model, a separate cost is incurred for each user of a SaaS application and is similar to paying for each copy of software on a workstation. The advantage over traditional software pricing is that SaaS is available on almost all devices and doesn’t usually incur separate charges for tablets, laptops, phones and other devices. SaaS billing occurs on a periodic basis (usually monthly) for all registered users. SaaS software entitlements are best managed through a centralized and existing identity management system.

A variation of the pay-per-user SaaS pricing model is the pay-per-multiple-user pricing model, wherein a separate cost is incurred for a specified number of users. For example, a SaaS application could be billed on a multiple user basis of two to 99 users as the first tier of the pricing plan and between 100 and 250 users as the second tier of the pricing plan. Providers who use this pricing model typically bundle an increasing number of features or types of functionality within each successive tier.

Pay-As-You-Go (Utility) SaaS Pricing Model

Another pricing model used by SaaS vendors is the pay-as-you-go billing model, which typically charges for the number of users and the amount of resources (e.g. volume of storage space, CPU usage, etc.) being consumed during a given time period. The primary disadvantage to the client under this pricing model is the difficulty in predicting ongoing software expenses. On the other hand, the pay-as-you-go pricing model can be beneficial for an organization since they are only required to pay for the actual volume of resources consumed, rather than paying a flat rate for a bundle of services that they may not fully use.