Definition
Over the course of the past few decades, SaaS has become an integral part of our daily lives, both at work and at home. SaaS is a cloud computing model that offers users access to internet-based applications and services. Its versatility lends itself to both B2B and B2C use cases, but the integration of SaaS into IT infrastructures has become an absolute business essential.
SaaS is divided into two categories: B2B and B2C. B2B SaaS (Business-to-Business Software as a Service) consists of all types of SaaS applications tailored specifically for other businesses. Some examples of B2B SaaS include productivity applications, CRM (Customer Relationship Management) software, PM (Project Management) software, videoconferencing applications, etc. To access these services, SaaS vendors offer them with varying pricing models. Some of the most popular pricing models are subscription-based, user-based, and pay-as-you-go (PAYG).
In this article, we will take a closer look at SaaS subscriptions and SaaS subscription management, what it is, how it works, and best practices to make the most of your B2B SaaS software.
Processes of SaaS Subscription Management
SaaS subscription management is the process of overseeing, optimizing, and maintaining a company’s SaaS subscriptions. SaaS is an essential for businesses of all sizes, ranging from startups and SMEs to multinational corporations. The larger the corporation, the more complex SaaS subscription management will become. However, that’s not to say that SME SaaS subscription management doesn’t have its own complications and challenges.
A SaaS subscription is a payment model that allows customers to purchase licenses from SaaS vendors in order to gain access to their services. A SaaS subscription is similar to paying rent, with a scheduled billing plan to maintain ownership rights to the license.
SaaS subscription management follows the entire lifecycle of a SaaS subscription, beginning with the initial planning phase and purchase, then to subscription renewals and finally termination or expiration. There are two basic billing cycles: monthly and yearly; however, subscription models vary to accommodate different services and use cases. Each SaaS vendor has its own variation of these subscription models, but here is a list of the five most common types of B2B SaaS subscription models.
- Flat Rate Pricing
- Tiered Pricing
- Usage-based Pricing
- Per-User Pricing
- Subscriptions with Add-ons
Most businesses run several different SaaS applications throughout their organization. B2B SaaS subscription management is responsible for monitoring, maintaining, and optimizing all of these subscriptions. To do this successfully, effectively, and cost-consciously, there should be SOPs and well-defined protocols in place to determine responsibility for each of these services, manage vendor relationships, as well as track active users and usage consumption.
SaaS Pricing Models
SaaS subscription pricing models vary depending on the vendor and the specific service(s) they provide. Therefore, it’s important to understand these different models and how they work. Here is a brief outline of the five standard SaaS pricing models:Flat Rate Pricing
Flat-rate pricing (also known as flat-rate licensing) is a subscription model that allows a customer to make fixed payments for SaaS services on a regular billing schedule (monthly or yearly).Tiered Pricing
Tiered pricing offers a little more flexibility and scalability.Usage-based Pricing
As the name implies, usage-based pricing is a subscription model that is determined by actual consumption and billed on a regular cycle (monthly, quarterly, or annually).Per-User Pricing
Per-user pricing is a subscription model based on active user licenses. This pricing structure has a regular billing cycle.Subscriptions with Add-ons
The subscriptions with add-ons pricing model is an attractive pricing model due to its customizability and scalability.SaaS Subscription Lifecycle
SaaS subscriptions have a lifecycle. To effectively manage these subscriptions, having an outline of the various tasks and procedures that should be performed throughout each phase of the subscription lifecycle is a great way to maintain visibility, optimize your SaaS subscriptions, and prevent overspending and waste.
Planning and Analysis
Before purchasing a SaaS subscription, there should always be a plan in place and an analysis of current business needs to ensure you make the best decision for your company.
Negotiation
Some B2B SaaS subscription plans require negotiation of terms. If this is the case, teams and individuals in different areas of your company will need to collaborate to ensure there are no hidden fees, overlooked terms, or missing details. Negotiation is all about making the contract as favorable as possible for your company. This includes pricing, contract duration, security and compliance, as well as capacity and scalability features.
Acquisition
Once you’ve jumped through all the initial hoops of planning and negotiation, you have finally reached the point of purchase. This phase is the acquisition phase in which you will purchase the subscription and gain access to the software.
Activation and Implementation
Once the subscription has been successfully acquired, you will need to activate the subscription and go through a phase of implementation into your company’s system.
Usage and Billing
The usage and billing phases covers the majority of a SaaS subscription lifecycle. During its use, consumption should be tracked and monitored, and value should be periodically assessed.
Optimization
Optimization is a process that can occur at any point during the usage period of a SaaS subscription. SaaS subscription optimization involves regularly analyzing SaaS consumption and cost against real value and ROI. This process ensures that you are only paying for the licenses you actually need and are using them resourcefully to minimize cost and maximize productivity.
Termination or Expiration
Termination is simply the point at which you deem a SaaS license no longer useful or worthwhile and cancel the subscription. There are numerous different reasons for this, some of those include: removal of abandoned licenses, upgrades, elimination of SaaS sprawl, and switching vendors. Expiration on the other hand, usually refers to SaaS subscriptions that were not renewed by the given renewal date and are thereby expired and access is lost. This may be intentional or accidental. If it’s the latter, you will need to contact the vendor and find a solution to recover the SaaS subscription.
5 SaaS Subscription Management Best Practices
Running an efficient SaaS subscription management system requires well-defined protocols and the implementation of best practices. Furthermore, these practices apply to more than just your IT department; other teams or departments may also be involved to some extent, namely security and compliance.Integrate Automation Tools
SaaS subscription management software solutions, like USU’s SAM solution, are designed with automation tools and capabilities to centralize workflows and eHave an Advanced Tracking and Reporting System
Tracking workflows and generating reports are essential for nearly all business functions. For SaaS subscriptions, you will need to keep record of purchase history, renewal dates, track license allocation and usage, track compliance and security updates, etc.Monitor Performance
A key aspect of SaaS license management is monitoring the performance of the licenses and their ROI.Maintain Security and Compliance
Maintaining SaaS security and compliance involves monitoring internal security and compliance as well as ensuring all external parties (i.e., SaaS vendors, consultants, etc.) are maintaining security and compliance protocols or regulations on their end.Build a Strong Vendor Relationship
Vendor relationship management is one of SaaS subscription management’s more underrated best practices. Building a strong relationship with your SaaS vendor will foster trust and facilitate greater flexibility during the negotiation process.Manage your SaaS Subscriptions with USU
As a business grows, subscription and user management for SaaS solutions can become complicated and messy. One of the primary reasons for this issue is a lack of tools to effectively track and monitor your SaaS subscriptions, user assignment, spending, and SaaS consumption.
USU Software Asset Management for SaaS is a comprehensive solution that can easily integrate into most SaaS systems and provide a thorough overview and analysis of your entire cloud environment. Generate real-time reports for instant visibility into spending and usage patterns, customize and automate your workflows and SaaS subscription management system to improve operability and ensure compliance, and optimize your SaaS license to reduce spending, prevent future SaaS sprawl, and reduce risk.
Want to learn more? Contact us HERE to get in touch with one of our experts and find the best solution for your business.
Conclusion
By integrating automation tools like USU’s SAM solution and applying best practices, you can optimize and better align your SaaS subscription management with business goals and improve SaaS efficiency, accuracy, and compliance.
FAQ
What is a SaaS subscription?
A SaaS subscription is a type of pricing model used to purchase a license or usage rights to cloud-based software applications and tools. To maintain access to these online services, payments are made on a regular basis, most commonly monthly, or sometimes it may also be quarterly or annually.
What is the difference between a SaaS subscription and a SaaS license?
A SaaS subscription is a pricing model used to purchase SaaS solutions and maintain access by making periodic payments on a scheduled billing cycle. SaaS subscriptions are generally billed on a monthly, quarterly, or annual basis. Once you reach the end of the specified term, you will be required to either renew or terminate your subscription.
A SaaS license is an accessibility agreement between the vendor and customer. SaaS licenses are paid for with subscription-based pricing (typically monthly or annually) and provide customers with the flexibility to both maintain or terminate their license and update as upgrades are made available. SaaS software is always hosted and owned by the SaaS vendor.
What is the difference between SaaS and B2B SaaS?
SaaS (Software as a Service) is a general term for all ready-to-use, cloud-based software applications and tools. These products and services are available to the public and can be purchased online by anyone for personal or work-related use without the need for negotiation of terms and an official contractual agreement.
B2B SaaS (Business to Business Software as a Service) refers to all plug-and-play cloud applications and tools that are tailored to businesses. However, these solutions are also available publicly and can therefore be purchased at will by anyone without the need to negotiate an agreement.