Development of Software as a Service costing in a case company

Abstract

The growing popularity of the Software as a Service (SaaS) model has led to innovative on-demand solutions within the IT domain. However, the model has also resulted in the emergence of various accounting problems, for example in costing, due to varied degree of intangibility and complex setup schemes, such as shared infrastructure, referred to as multitenancy. This master’s thesis posits a costing solution proposal for a Finnish IT services and consulting company, hereby referred to as Company X, regarding a certain SaaS product. The study utilized prior research to design and create cost drivers, as well as utilized expertise and reference cases from neighboring Company X units. The study was mainly conducted qualitatively with a constructive research approach and the majority of data was collected by interviewing a total of seven Company X employees in the form of unstructured interviews. The findings of the study indicated that a semi-automated cost allocation solution, coined as cost forwarding, could be deployed to facilitate and streamline the allocation of SaaS costs within Company X. The output of the thesis was to design cost pools as per activity-based costing (ABC), coined as cost collection projects in this study, as well as designing cost drivers and cost forwarding rules for used and unused capacity and labor costs. The final output was to simulate and test the cost forwarding system in practice, which indicated good accuracy and predictability across all cost types in terms of forwarding costs to customer projects. However, one limitation of the system was that cost discrepancies between customers with different service sizing grew as the customer base was increased.