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Enterprise SaaS Solution and Hosted Solution, is there a difference?

When it comes to enterprise software, would you say there is a difference between a hosted solution and an SaaS solution? Can we still use a “subscription” based pricing model?

Answer 1880

I think it comes down to the education level of the customer. Some customers see anything that isn’t running inside their data as being the same thing as salesforce. In reality we know that there are very clear distinctions between the different tiers.

The fundamentals that concern well versed customers are:

  1. Is the application Multi-Tenant? I.e. is my data going to be merged with other customers data? From a security point of view, what are my risks of disclosing my data to another party if there is a glitch in the system.
  2. What are the options/implications of customization? If this is just another copy of the software running stand alone, do I have complete decision making in how the application is configured, and can I write custom code/integrations if need be. This also affects your ugprade path. If you are constantly having to remerge your configurations and customization back in with every release, that has tangible impact in terms of labor for the customer.
  3. How does it scale? This affects both pricing and platform capability. If I go from x number of users to 5x, is it as simple as paying for more seats? Am I going to have to pay for some sort of migration to a different instance? In a true SaaS environment everything should be linear and upgrades should be almost magical. In a hosted solution model, if you scale up dramatically you might have to switch to different hardware.
  4. What is the maturity of the vendor? A lot of companies think they understand these concepts as vendors when in reality they are just as ignorant as the customers.

Answer 1858

To manage customer perceptions of pricing, framing is critical. Different contexts convey different expectations, and you always want to avoid any sense that you are pricing unfairly.

So if you major on your SaaS, and establish reference pricing there, you can frame a hosted version as:

  1. A service delivery option - with essentially the same price structures as your SaaS (eliminating obviously irrelevant tiers etc) plus significant additional fees for providing and maintaining the private system

  2. A standalone proposition, following the norms for enterprise software licensing

  3. If your pricing is relatively complex, then you can also frame a private instance as a hybrid model, where you add some fees but also eliminate some price factors (e.g. you might retain per-seat charging but remove storage tiers)

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