SaaS - Justifying The Higher Price

Justifying a higher price for SaaS

 Arguing and justifying a higher price for a SaaS solution versus an on-premises solution can be challenging, but there are several factors that can help support the higher price point.

In a customer survey and in the following Pricing and EBIT calculation we have identified, that SaaS versus on-prem net deal pricing needs to be appr. 20% higher to cover the additional cost of providing the Infrastructure, Hosting Services, Security, etc.

The “willingness to pay” assessed in the customer survey indicated, that customers may accept a higher net deal price of up to 8% but not the “needed” 20% to get SaaS providing the same (or close to) EBIT as the on-prem offering variant. So it is not a surprise that many customers are expecting net deal price levels for SaaS to be on the same or close to the on-prem offering variant.

 However, here are a some key and hopefully helpful arguments you can use to justify the higher price of a SaaS solution:

 1.        Faster Deployment: SaaS solutions are typically deployed faster than on-premise software, as the software is already installed and configured on cloud-based servers.

2.        Lower Upfront Costs: While the ongoing subscription cost for a SaaS solution may be higher, the upfront costs are typically lower than those associated with an on-premises solution. This can include hardware, software licenses, implementation, and maintenance costs. By shifting these costs to the SaaS provider, the customer can free up capital and reduce their upfront investment.

3.        Scalability and Flexibility: SaaS solutions are designed to be scalable and flexible, allowing customers to easily add or remove users and adjust the level of service as needed. This means that as the customer's business grows, the SaaS solution can grow with them, without requiring additional hardware or software investment. This scalability and flexibility can help justify the higher price point.

4.        Continuous Updates and Improvements: SaaS providers are responsible for maintaining and updating the software, which means that customers always have access to the latest features and functionality. This can help reduce the need for costly upgrades and ensure that the software remains up to date and relevant. The cost of continuous updates and improvements can be factored into the higher price point of the SaaS solution.

5.        Accessibility and Remote Access: SaaS solutions are typically accessible from anywhere with an internet connection, making it easier for remote employees or those working from home to access the software. This accessibility and remote access can help improve productivity and collaboration, which can ultimately justify the higher price point.

6.        Reduced IT Overhead: SaaS solutions can help reduce the need for IT staff, as the SaaS provider is responsible for maintaining and updating the software. This can help reduce the overall IT overhead for the customer and justify the higher price point.

 Overall, the higher price of a SaaS solution can be justified by the faster deployment/time-to-production, lower upfront costs, scalability and flexibility, continuous updates and improvements, accessibility and remote access, and reduced IT overhead.

By highlighting these factors and demonstrating how they can benefit the customer, you can help justify the higher price point and make a compelling argument for the value of the SaaS solution.

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