Title

The Pricing Strategy Analysis for the Software-as-a-Service Business Model

Publication Type

Conference Proceeding Article

Publication Date

8-2008

Abstract

The Software-as-a-Service (SaaS) model is a novel way of delivering software applications. In this paper, we present an analytical model to study the competition between the SaaS and the traditional COTS (Commercial off-the-shelf) software. The main research goal is to analyze the pricing strategy of the SaaS in a competitive setting. The model captures the most salient differences between the SaaS and COTS, including their distinct pricing structures, user initial setup costs, system customization levels, and delivery channels. We find that the two could coexist in a competitive market in the long run, and more importantly, we show how the SaaS could gradually take over the whole market even when its quality is inferior. Surprisingly, our analysis shows that the SaaS should raise (reduce) its prices when its software quality declines (increases) over time (in the relative sense).

Keywords

SaaS business model, pricing strategy, competition, COTS software

Discipline

Computer Sciences | Management Information Systems

Research Areas

Information Systems and Management

Publication

Grid Economics and Business Models: 5th International Workshop, GECON 2008, Las Palmas de Gran Canaria, Spain, August 26, 2008. Proceedings

Volume

5206

First Page

103

Last Page

112

ISBN

9783540854852

Identifier

10.1007/978-3-540-85485-2_8

Publisher

Springer Verlag

City or Country

Berlin

Additional URL

http://dx.doi.org/10.1007/978-3-540-85485-2_8