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One of the most important changes in the world of OnDemand software is the use of innovative pricing models ranging from Freemium to monthly subscription fees based on number of users accessing the application.

The variety of factors on which these pricing models are based is amazing.  Such models often include various indicators – range from number of projects / forms created, amount of data provided, number of transactions used, etc – and are combined in easy to distinguish packages that provide the widest audience the opportunity to use the platform.

Note: It is important to distinguish between the features that are provided in different models where the monthly price is based a per user calculation and those pricing models are associated with another factors (number of transactions, forms, etc) and number of users are unlimited.

Pricing Metrics used in Enterprise OnDemand solutions

What about in OnDemand solutions that are more focused on business users?

Salesforce’s pricing is based on users:

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Workday’s pricing is more mysterious:

While Workday delivers some social tools and claims to be a social enterprise itself, the software vendor is far from transparent when it comes to software pricing. Workday refrains from disclosing pricing models in favor of letting their sales professionals negotiate such information with prospects during the sales cycle.

However, as a guideline Workday prices its software based on a subscription pricing model that represents metrics for the overall client business, rather than per-Workday-user. This model is based on the total number of employees (or total revenue) and service areas. [SOURCE]

Metrics used by SAP

As I read the various Terms of Services for SAP’s OnDemand solutions, I became very aware of the diversity of metrics that are used in SAP’s subscription-based SaaS offers.

Service

Metric

Precision Retailing

Actual number of mobile coupons activated and registered consumer users during such quarter.

Business Network as a Service

Number of EDI Relations and Invoices

Data Enrichment and Classification

Spend Volume means the total amount of a legal entity’s annual expenditure for the procurement of all direct and indirect goods and services.

EPM OnDemand

Total number of Employees (including contract workers) in Customer’s corporate organization,

Product Safety OnDemand

Number of substances which are maintained by Customer in the Service

Sales and Operations Planning OnDemand

Customer’s corporate group’s

most recent annual gross revenue (“Annual Revenue”), as contained in Customer’s annual audited income statement

EHS Regulatory Content OnDemand

Customer’s corporate group’s Revenue, as defined by International Financial Reporting Standards (IFRS).

SuccessFactors Business Execution Suite : Workforce Analytics and/or Workforce Planning Service

Number of Employees in Customer’s and its participating Customer Affiliates’ organization.

Supplier Infonet OnDemand

Number of Employees in Customer’s legal entity.

Travel OnDemand

Number of expense reports processed per year by Customer

POV

What I like about SAP’s diverse pricing models is that they reflect an understanding of the underlying business logic of these particular applications. 

What might be difficult for customers, however, is the predictability of such environments. A per user monthly cost is rather easier to estimate and budget accordingly. If multiple SaaS applications are used – each with a different pricing metric and usage patterns – then those dealing with the future financial impact of such usage might be confronted with difficult calculations. 

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5 Comments

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  1. Yariv Zur

    Very nice roundup. Looking forward to see NetWeaver Cloud metrics here. There, the comparison would be vs. Force.com and not Saleforce.com, I guess.

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    1. Richard Hirsch Post author

      I’d like to do that as well but currently there is no pricing info for NW Cloud available.  I assume that more data will be available at the TechEds.

      The next question would be which which PaaSs to select for the comparison – I’d probably include Heroku.

      I expect to blog about such PaaS comparisons later this year. 

      D. 

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  2. Luke Marson

    Hi Dick,

    Another good blog. I find it interesting how SAP are pricing their products and on a siloed basis it seems fair. However, as you point out, managing the licenses and subscriptions once multiple services are used does seem tricky and makes me think how organizations can measure the value they are getting when they have multiple SaaS services.

    Best regards,

    Luke

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    1. Richard Hirsch Post author

      Luke,

      I assume that SAP will present a unified solution to customers to deal with such complexity. Having to deal with different billing systems for different OnDemand solutions won’t lead to happy customers.

      D.

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      1. Luke Marson

        It seems a bit of a patchwork quilt right now – but I guess we’re still in the embryonic stages of cloud computing at SAP. It will take some time to unify a number of things, particularly the messages they are communicating to the public… 😉

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