SaaSification for ISVs: what you should charge your customers  

By now, Software as a Service (SaaS) has become the standard for enterprise applications. Independent Software Vendors (ISVs) that don’t embrace the change, risk missing the boat. But SaaSification is quite an investment for an ISV, and the corresponding Service Level Agreement comes with extra responsibilities. Will your customers accept increased charges for the additional services? 

Since the pandemic, we have become used to being able to work anytime, from anywhere – working in the cloud quickly became a general trend. For enterprise applications, the current standard is ‘Software as a Service unless…’  

There are several other reasons for this ‘SaaSification’ besides the increased popularity of hybrid working. Your customers wish to avoid the operational burden of hosting your application and also expect flexible and transparent pricing based on functionality and usage metrics. Independent Software Vendors (ISVs) that continue selling traditional licenses run the risk of losing out to SaaS alternatives. 

“Will my customers accept an increased rate?” 

Offering a SaaS application requires investments and increases your operational costs: 

  • Hiring new talent and training existing personnel. 
  • Expanding the scope of operational activities from software development to managing a hosted environment while fulfilling operational SLAs. 
  • Using public cloud resources. 
  • Buying or renting third party licenses that are required to run and manage your hosted application (OS, database, monitoring, back-up, security licenses etc.) 

These additional costs necessitate higher fees per customer. The million-dollar question: will customers accept your increased fees and switch to SaaS? 

spoiler alert: 

Your customers will indeed accept a substantial price increase. Why? Read on to find out:  

SaaSification for ISVs: how to calculate your Saas fees 

Before calculating what you think would be a fair fee, you would do well to walk a mile in your customer’s shoes. When working with on-premises applications, your customer has to deal with myriad line items beyond the scope of your traditional license agreement that mostly concerns software support and maintenance. After switching to SaaS delivery, all of those service costs become the ISV’s responsibility… thereby saving the customer a lot of money (not to mention a lot of hassle). 

In order to help you calculate your new pricing strategy, we have designed an infographic detailing the different line items your customers pay for on-premises software. Spoiler alert: it all adds up to a pretty penny already, so no need to worry about a sizable price increase! Considering the new, all-encompassing proposition you offer and the value for money your customers will get, charging more is definitely realistic. 

Want to know all the ins and outs about SaaSification? Download our infographic here. 

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