Revealing the State of Software-as-a-Service Pricing

Abstract

The transition towards cloud computing is transforming the way software solutions are designed and developed, priced and packaged, as well as delivered and maintained. Software companies are moving away from the traditional model of selling software solutions as off-the-shelf software products to providing Software-as-a-Service (SaaS) solutions. This transition unlocks unique opportunities for reconsidering product and marketing strategies, including pricing. The fundamental changes that affect pricing are the adoption of value-based and subscription-based approaches. Both of these create challenges for product and pricing managers, and only a handful of software companies succeed in taking advantage of all the opportunities the SaaS model offers.

This dissertation explores how software companies establish and implement the pricing of their SaaS solutions. This research aims to reveal the nature of pricing for SaaS solutions and empower SaaS companies with the knowledge required to advance their pricing processes and practices. The dissertation consists of four studies that employed a portfolio of research methods, including a simulation modeling, a multivocal literature review, a multiple case study research, and an industry survey.

The contribution of this dissertation is threefold. First, the dissertation bridges the gap between scholars and practitioners and proposes a typology of SaaS pricing aspects, affecting factors, frameworks, and structures. It updates the knowledge and expertise in the SaaS pricing area of research and practice. Second, the dissertation reveals how SaaS companies price their solutions by evaluating industrial practices and exploring the reasons behind them. This allows proposing a typology of SaaS pricing practices. Thirdly, an integrated simulation model of SaaS pricing is put forward to analyze dynamic pricing mechanisms. This model serves as an example of how different pricing mechanisms and factors can be explored to improve decision-making in SaaS pricing.

Ultimately, this research should contribute to a reduction in the market failure risk for technologically advanced SaaS solutions. The result of the research indicates a lack of silver-bullet solutions for pricing, meaning that it should not be left to intuition and performed in an ad hoc manner. On the contrary, pricing requires efficient collaboration between different business units and a comprehensive analysis that incorporates experimentation, data analytics, and modeling.