The Pricing Strategy Analysis for the Software-as-a-Service Business Model
Conference Proceeding Article
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).
SaaS business model, pricing strategy, competition, COTS software
Computer Sciences | Management Information Systems
Information Systems and Management
Grid Economics and Business Models: 5th International Workshop, GECON 2008, Las Palmas de Gran Canaria, Spain, August 26, 2008: Proceedings
City or Country
MA, Dan and Seidmann, Abraham.
The Pricing Strategy Analysis for the Software-as-a-Service Business Model. (2008). Grid Economics and Business Models: 5th International Workshop, GECON 2008, Las Palmas de Gran Canaria, Spain, August 26, 2008: Proceedings. 5206, 103-112. Research Collection School Of Information Systems.
Available at: http://ink.library.smu.edu.sg/sis_research/413