Customer is King? A Framework to Shift from Cost- to Value-Based Pricing in Software as a Service: The Case of Business Intelligence Software

Abstract : With a shift from the purchase of a product to the delivery of a service, cloud computing has revolutionized the software industry. Its cost structure has changed with the introduction of Software as a Service (SaaS), resulting in decreasing variable costs and necessary amendments to the software vendors’ pricing models. In order to justify the gap between the software’s price and the incremental cost of adding a new customer, it is essential for the vendor to focus on the added value for the client. This shift from cost- to value-based pricing models has so far not been thoroughly studied. Through literature review and expert interviews, a conceptual model for customer-centric SaaS pricing, especially Business Intelligence & Business Analytics tools, has been developed. The model has then been initially validated by discussions with the top five software players in this realm and builds a strong basis for further theoretical inquiry and practical application.