3 ms·

A lot of this is obvious now but not as much 8-10 years ago. Don't price your SaaS per seat, ever. It will be abused. My tiny, niche SaaS uses X 'resources' co

by bkuehl 6y ago

A lot of this is obvious now but not as much 8-10 years ago. Don't price your SaaS per seat, ever. It will be abused. My tiny, niche SaaS uses X 'resources' configured in the product. If you have X resources configured for your business it means you're big enough to pay more.

smhg 6y ago
I agree per-seat is problematic, but (from experience) per-resource-configured is similar. Usage-based sounds like the ideal solution. Although I haven't figured how to set that up yet. Your don't want to encourage low usage.
- meowface 6y ago
  >usage-based sounds like the ideal solution. Although I haven't figured how to set that up yet. Your don't want to encourage low usage. As an end user of some B2B software priced using this model, I can vouch for this. It's been frustrating for me and my coworkers, and it does do what you say: encourage low(er) usage. (Especially if it's variable pricing rather than being split into different tiers based on usage ranges.) The perspective I and others have felt is that "you're punished for using the product". There are different ways usage could be measured, but for some information security products that process or analyze logs/events, for example, the more things you log, the more your costs increase linearly. There are many instances where a valuable logging initiative could increase costs by 2x - 10x. I remember having to spend time away from actual work in order to find log sources to cut to reduce the extremely hefty costs we were paying.
  - porker 6y ago
    Is this down to who has authority to approve spending, and it's easier to get approval for a larger chunk at once? As a business owner I'm the opposite of you; I want more services to have usage-based pricing like S3. Take your logging example. It seems fair that if I log 2x more I pay 2x more. If there's business value in that logging then it's a no-brainer. With fixed pricing tiers I know that's when I'm at the lower usage end I'm paying over the odds, and when I'm at the upper end I have the problem you describe of not wanting to exceed my usage and move up a tier with a large price increase.
    - meowface 6y ago
      >With fixed pricing tiers I know that's when I'm at the lower usage end I'm paying over the odds, and when I'm at the upper end I have the problem you describe of not wanting to exceed my usage and move up a large price-step. True, that can be an issue, as well, but once you're an enterprise at a sufficiently large size and are pretty much always guaranteed to be in the highest tier anyway, the flat monthly price can often be a lot less costly. For the record, the main product I'm referring to in this case is Splunk. Excellent product that I love using (and still often use the free tier of for personal use), but I know a lot of companies have moved away from it due to the cost. I think logging doesn't necessarily scale that closely with company size, revenue, how many people are using the product, how many actual machines you have, etc. A competent, motivated, small team at a small company with not that many systems could end up logging a lot more events per day than a much bigger team at a much bigger company with many more systems. Especially if the team is specifically focused on logging for security purposes. And in this case, the variable pricing is arbitrary rather than a response to an actual increase in cost: the product is hosted on-site and maintained internally, with us also covering costs for the server cluster and resources, so it's not like there's any kind of marginal cost for the company based on how much we log. I don't think it's necessarily a bad pricing strategy in terms of what can generate the most revenue for their company, or that it's unfair or underhanded or that they don't deserve it or anything like that, but I and some other people who spent most of our day working with it just began to find it frustrating.
glenngillen 6y ago
This seems obvious, until you’re trying to sell large enterprise deals and contract negotiation goes to procurement teams. Who have little idea what your custom units of measurement are, or how to forecast reasonable future capacity planning around team. Meanwhile headcount (seats) is easy for them to understand. With a well established model and hiring planning for the coming 12mo. Don’t assume the consumer of your product is also the buyer.
- bkuehl 6y ago
  Head count makes sense in some spaces/products. I shouldn't have been so definitive. However, the units of measure used should always be something the target enterprise understands. For example, the company I work for in healthcare prices contracts by number of beds, which is a number ever hospital understands. Im so glad I don't have to tell someone that they can't be added to use the product cause their seats are maxed out.
lloydatkinson 6y ago
May I ask what sort of business you do? Trying to figure out what resources would be in given scenarios.
- theelous3 6y ago
  Price per request is the most obvious one. If you had a widget solver, you could charge per widget solved. This way a one widget solve request or a csv upload of a million widgets are priced accordingly. You can also charge per mb, if your service is some sort of data piping. Or if it's a ML translation service, you charge per word. That kinda thing.
- bkuehl 6y ago
  Sorry, just seeing this now. In my scenario, it's number of vesseils available for charters. So you pay so much for first vessels and some more for additional vessels. Companies with more vessels have more revenue so they can pay more.
ozim 6y ago
I have to say there are SaaS solututions that work just fine to be priced per seat. For example JIRA where it is part of job of each person to handle tickets/tasks and they have to have separate accounts. There is also basically no feasible way to abuse JIRA unless one does not care about who did what and when so throwing tracability/accountability out of the window. For solutions like Adobe Photoshop as an example, I would not care who used it in our company, I just care about the result. Managing licenses for it is just annoying burden and I can see how people would like to have one account and pay for usage. It is also quite easy to abuse because output is not tied to person work as in accountability/who changed what/ way. I would say one has to understand his product and how it is used instead of "never do X" advices.
cat199 6y ago
On the flipside, i once experienced a 'fun' renegotiation with oracle (surprise) when we were migrating to core-dense architectures and they changed their licensing model - We could either move from 40k/instance to 40k/cpu (so in this case - pay 8x more), or, they would be willing to work with us on a low 'per client' fee. Unfortunately, the system in question was a network management system for many 1000s of devices, and they were attempting to treat each device & each person in the organization touching any software connected to the system as a 'client' ... management quickly started to investigate the viability of postgres/enterprisedb ... though I think in the end we were able to renegotiate oracle back down to this planet.

by bkuehl 6y ago

smhg 6y ago

I agree per-seat is problematic, but (from experience) per-resource-configured is similar. Usage-based sounds like the ideal solution. Although I haven't figured how to set that up yet. Your don't want to encourage low usage.

meowface 6y ago
>usage-based sounds like the ideal solution. Although I haven't figured how to set that up yet. Your don't want to encourage low usage. As an end user of some B2B software priced using this model, I can vouch for this. It's been frustrating for me and my coworkers, and it does do what you say: encourage low(er) usage. (Especially if it's variable pricing rather than being split into different tiers based on usage ranges.) The perspective I and others have felt is that "you're punished for using the product". There are different ways usage could be measured, but for some information security products that process or analyze logs/events, for example, the more things you log, the more your costs increase linearly. There are many instances where a valuable logging initiative could increase costs by 2x - 10x. I remember having to spend time away from actual work in order to find log sources to cut to reduce the extremely hefty costs we were paying.
- porker 6y ago
  Is this down to who has authority to approve spending, and it's easier to get approval for a larger chunk at once? As a business owner I'm the opposite of you; I want more services to have usage-based pricing like S3. Take your logging example. It seems fair that if I log 2x more I pay 2x more. If there's business value in that logging then it's a no-brainer. With fixed pricing tiers I know that's when I'm at the lower usage end I'm paying over the odds, and when I'm at the upper end I have the problem you describe of not wanting to exceed my usage and move up a tier with a large price increase.
  - meowface 6y ago
    >With fixed pricing tiers I know that's when I'm at the lower usage end I'm paying over the odds, and when I'm at the upper end I have the problem you describe of not wanting to exceed my usage and move up a large price-step. True, that can be an issue, as well, but once you're an enterprise at a sufficiently large size and are pretty much always guaranteed to be in the highest tier anyway, the flat monthly price can often be a lot less costly. For the record, the main product I'm referring to in this case is Splunk. Excellent product that I love using (and still often use the free tier of for personal use), but I know a lot of companies have moved away from it due to the cost. I think logging doesn't necessarily scale that closely with company size, revenue, how many people are using the product, how many actual machines you have, etc. A competent, motivated, small team at a small company with not that many systems could end up logging a lot more events per day than a much bigger team at a much bigger company with many more systems. Especially if the team is specifically focused on logging for security purposes. And in this case, the variable pricing is arbitrary rather than a response to an actual increase in cost: the product is hosted on-site and maintained internally, with us also covering costs for the server cluster and resources, so it's not like there's any kind of marginal cost for the company based on how much we log. I don't think it's necessarily a bad pricing strategy in terms of what can generate the most revenue for their company, or that it's unfair or underhanded or that they don't deserve it or anything like that, but I and some other people who spent most of our day working with it just began to find it frustrating.

glenngillen 6y ago

This seems obvious, until you’re trying to sell large enterprise deals and contract negotiation goes to procurement teams. Who have little idea what your custom units of measurement are, or how to forecast reasonable future capacity planning around team. Meanwhile headcount (seats) is easy for them to understand. With a well established model and hiring planning for the coming 12mo. Don’t assume the consumer of your product is also the buyer.

bkuehl 6y ago
Head count makes sense in some spaces/products. I shouldn't have been so definitive. However, the units of measure used should always be something the target enterprise understands. For example, the company I work for in healthcare prices contracts by number of beds, which is a number ever hospital understands. Im so glad I don't have to tell someone that they can't be added to use the product cause their seats are maxed out.

lloydatkinson 6y ago

May I ask what sort of business you do? Trying to figure out what resources would be in given scenarios.

theelous3 6y ago
Price per request is the most obvious one. If you had a widget solver, you could charge per widget solved. This way a one widget solve request or a csv upload of a million widgets are priced accordingly. You can also charge per mb, if your service is some sort of data piping. Or if it's a ML translation service, you charge per word. That kinda thing.
bkuehl 6y ago
Sorry, just seeing this now. In my scenario, it's number of vesseils available for charters. So you pay so much for first vessels and some more for additional vessels. Companies with more vessels have more revenue so they can pay more.

ozim 6y ago

I have to say there are SaaS solututions that work just fine to be priced per seat. For example JIRA where it is part of job of each person to handle tickets/tasks and they have to have separate accounts. There is also basically no feasible way to abuse JIRA unless one does not care about who did what and when so throwing tracability/accountability out of the window. For solutions like Adobe Photoshop as an example, I would not care who used it in our company, I just care about the result. Managing licenses for it is just annoying burden and I can see how people would like to have one account and pay for usage. It is also quite easy to abuse because output is not tied to person work as in accountability/who changed what/ way. I would say one has to understand his product and how it is used instead of "never do X" advices.

cat199 6y ago

On the flipside, i once experienced a 'fun' renegotiation with oracle (surprise) when we were migrating to core-dense architectures and they changed their licensing model - We could either move from 40k/instance to 40k/cpu (so in this case - pay 8x more), or, they would be willing to work with us on a low 'per client' fee. Unfortunately, the system in question was a network management system for many 1000s of devices, and they were attempting to treat each device & each person in the organization touching any software connected to the system as a 'client' ... management quickly started to investigate the viability of postgres/enterprisedb ... though I think in the end we were able to renegotiate oracle back down to this planet.