The best way to establish value for something is to charge for it…in some instances.
... majority of the SaaS companies I interacted with all had one common need: the request for single sign-on (SSO). But when it came to monetizing this offering, most of them were reluctant to do so as they either didn’t see the true value of this new offering or couldn’t exactly figure out a model that was viable for their business. With some experimentation and modeling we were able to come up with several ways to monetize their SSO feature set, and over the years this offering grew as a strong source of the company’s recurring revenue.
Here are three successful models that have worked in the real world:
1. Pass-through: Under this model you directly pass the cost (zero markup) of the SSO software and development resources to the customer. This is a viable option when you only have a handful of customers or are looking to break even in the short term.
2. One time setup/maintenance fee: Once a SaaS company had operationalized their SSO offering they were able to charge a one-time setup fee, on average between $2.5K - $7K. In addition to SSO, if the vendor also offered additional security services (provisioning, deprovisioning, MFA) they were able to charge an additional ongoing maintenance fee, on average between $5K - $10K. Once you have hundreds of customers using SSO, these fees can become a good source of your annual recurring revenue (ARR).
3. Bundle offering: Sometimes it makes the most sense to bundle SSO with other enhanced features. For example, Salesforce.com offers its Salesforce Identity Service only with its Enterprise or Unlimited bundle offering. Orange Business Services offers a more enhanced security offering that is bundled with other enterprise grade security services. This model is suitable for companies who have a mature security offering and have a sound understanding of their customer’s buying habits.
The above methods are simple proven models that have worked for hundreds of SaaS companies and should work for many hundreds to come.
Tagged: SaaS, Security, SSO, Business Development, Partners, Business Model, Cloud Security, Channels, Channel Optimization
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