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Steady Transition to Software as a Service

Why should companies that need to crunch numbers just once a quarter have to invest in expensive solutions when they can pay by the compute cycle? The slow and steady transition to Software as a Service (SaaS) gives the enterprise a fairly stable budget item. The per-user, per-month pricing model is a fixed cost. As such, it allows a company to predict what its expenses are going to be, said Tim Bajarin, chief analyst at Creative Strategies.

Mark Dayman, CIO of application management provider NaviSite, believes the possibility for a company to try things out without making large capital investments is driving the uptake of the SaaS model. The model can be attractive even if it is just to do a beta test of an idea, Clayman said.

The utility model also allows a company to show off its services, functionality, and capabilities, and engage with customers who would otherwise be hesitant to enter into a long-term commitment. For the major enterprise software companies, this will be a hard transition. "It is an enormous change to go from a one-time revenue model to a recurring model," Clayman said.

What we are witnessing is the changeover from strict pricing orthodoxies, said EAC's Greenbaum. As traditional pricing models fall by the wayside, vendors are starting to experiment with a mix of deployment and pricing models


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