SaaS Billing & Pricing Models
SaaS pricing models typically bill clients using one of the following three metrics:
- Number of users
- Volume of resources consumed
- Combination of both of the above
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 the traditional software pricing is that SaaS is available on 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 the number of 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 2 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 the ongoing software expenses for the organization. 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 be able to fully use.