Traditionally, customers buy the license to software, install it on their own hardware and use it. Though some support would be given by the vendor, maintenance of hardware and data is the responsibility of the customer.
Software is priced on per license per user basis. There is a variable annual maintenance fees which is usually a percentage of the initial license fee. Ancillary services such as upgrades, training, etc are priced separately.
The vendor spends time and money on developing the software. Once the product development is finished, the incremental cost on acquiring a new customer decreases. New upgrades would be priced separately and ensured repeat business. This model made it easy for the vendor to estimate future revenues.
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How to Price SAAS Products?
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