Gartner Blog Network


Paying for what you use – too much to expect from SaaS?

by Stephen White  |  February 20, 2017  |  Comments Off on Paying for what you use – too much to expect from SaaS?

By definition cloud computing should deliver an elastic solution which is metered by usage, thus as the organization needs to increase or decrease consumption, that is measured and costs adjust accordingly.

Whilst these attributes are considered synonymous with cloud computing, in practice they are largely absent from SaaS offerings which being core within the majority of PaaS and IaaS.

In an era where more organizations have SaaS enterprise contracts due for renewal, a degree of disillusion and dissatisfaction with SaaS commercials is surfacing. Such a view, or emotion, is an outcome of a sequence of actions, whereby initial commitments to SaaS are made and incentivised by initial contract discounting, however on renewal prices escalate.

In cases price protection will be integral within the initial contract for multiple terms, however that protection in turn will regularly be conditional upon maintaining up-front quantities. Accordingly clients trade price risk for any scope to scale down commitments, thus losing elasticity benefits.

puzzle piece

As the SaaS market matures will this sequence continue? Or will an alternative equation prevail? Perhaps. An alternative is emerging however. Whereby consumption billing based on active usage enables a stronger match with the notion that cloud computing will enable matching of costs with value.

There may be a series of influences behind SaaS active usage billing emergence.

  1. Firstly, client demand for a better deal, arguably driven by large enterprises.
  2. Second, greater use of capable SAM tools and growing SAM maturity provides awareness of wastage and shelfware, whilst enabling predictability of future consumption based costs.
  3. Third, competition, new market entrants or disruptive providers choosing to use active usage to differentiate and dislodge incumbent providers.
  4. Fourth, SaaS available through marketplaces extends the consumption based model of the platform which it resides.

Gartner clients wishing to investigate the potential of SaaS consumption and active usage billing for the enterprise should see Consumption-Based Pricing Is Emerging From Leading SaaS Providers, but Beware! For service provider clients, see our research published this month addressing the same subject SaaS Active-Usage Billing Provides Opportunity to Disrupt Software Application Markets

Category: asset-management  cloud  licensing  

Tags: cloud  cost-optimization  saas  software  software-asset-management  

Stephen White
Research Director
2 years at Gartner
14 years IT Industry

Stephen White is a Research Director in Gartner's IT Asset Management, Vendor Management and Procurement team, focusing on strategic licensing and negotiation strategies, asset management, and reseller engagement. Mr. White leverages his experience in software sales and consulting to assist IT leaders through his coverage of best practices in license life cycle strategy and trends, license metric and pricing practices, contract negotiations, optimizing terms and conditions, sourcing, and relationship management. Read Full Bio




Comments are closed

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes, with attribution to Gartner. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.