A pricing framework for software-as-a-service

As an emerging business model, software-as-a-service (SaaS) has proliferated over the past decade and there are signs to suggest that this growth is likely to continue or even accelerate in the near future. By hosting single-versioned software coupled with supplementary delivery and maintenance services, SaaS vendors can effectively differentiate their product offerings from that of traditional on-premise software (TOPS). This paper highlights discrepancies in licensing practices between SaaS and TOPS before developing a three-level pricing framework that presents a complete inventory of licensing options for the former. Next, our proposed framework is validated based on content analysis of licensing strategies adopted by 353 SaaS vendors. In doing so, we identify trends that permeate licensing strategies in the SaaS market. As such, our proposed framework not only offers a comprehensive overview of pricing options that are accessible to SaaS vendors, but it also aids SaaS vendors in constructing lucrative software licenses by bringing forth pricing options which may have been neglected otherwise.