Revenue models in cloud computing

Abstract

Cloud computing brings new possibilities, allowing software firms to sell their software products using the Software-as-a-Service (SaaS) model. SaaS provides opportunities for flexible pricing but creates challenges on how to achieve a profitable revenue stream. In this multi-case study, the revenue models of five SaaS providers were examined. The main interest of the study was to investigate the different revenue models and the reasons for using particular revenue models. The revenue models were found to be mainly based on software renting, with a variety of pricing strategies. For SaaS providers, software renting generates a steady and predictable stream of revenue. The software renting model is also attractive to customers because (i) it facilitates prediction of the actual costs of the software, (ii) it decreases initial investments costs, and (iii) it makes it possible to purchase the software without special budgeting or the approval of top management. Interestingly, none of the firms used the commonly cited pay-per-use model.