SaaS Architecture and Pricing Models

Abstract

Abstract-In the new era of computing, SaaS software with different architectural characteristics might be priced in different ways. Even though both pricing and architectural characteristics are responsible for the success of the offering; the relationship between architectural and pricing characteristics has not been studied before. The present study fills this gap by employing a multi-case research. The findings accentuate that flexible and well-designed architecture enables different pricing models; however, poorly designed architecture limits also the pricing. Scalability and high level of modularity are the major enablers of a great variety of pricing models. Using public cloud services may lead to introducing usage-based pricing or in the contrary, making the pricing simpler. Applying multi-tenancy lowers the customizability, consequently the customers' negotiation power decreases. Pricing may give special requirements to the architectural design, such as scalability, customizability and additional components.

Discovering and creating business opportunities for cloud services

“…He found that software renting in the SaaS model leads to greater investments in product development and consequently to higher software quality. In a more recent study, Laatikainen and Ojala (2014) investigated how SaaS architecture impacts on opportunities to use different pricing models among SaaS providers. They found that scalability and high levels of modularity brought opportunities to apply a greater variety of pricing models.…”

Selection of the Proper Revenue and Pricing Model for SaaS

“…Price discrimination refers to a pricing model in which the same product is offered to different customers at different prices [16,17,20,21]. The price discrimination model can be divided into first-degree, second-degree, and third-degree price discrimination.…”

Right Scaling for Right Pricing: A Case Study on Total Cost of Ownership Measurement for Cloud Migration

“…customers are charged based on the number of transactions they perform) and premium based revenue (users are charged for premium versions besides the free versions) [13,16,48]. Irrespective of the pricing structure an SP adopts, a reliable estimate of the infrastructure costs it has to sustain to provide the service is required in order to ensure the existence of adequate margins [37]. This process has become more and more important for SPs due to increasing competition in the cloud environment, where SPs are sometimes forced to deliver services whose costs exceed revenues [17].…”