The Pros and Cons of Charging for Data Storage as Opposed to SaaS

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In the age of the cloud, many software providers have moved towards subscriptions as a service (SaaS) over traditional software licensing. With SaaS, customers only pay for the features they need and are billed monthly or annually rather than on a per-copy basis. This is convenient for both parties; businesses no longer need to make big upfront investments in software, and software vendors only receive payment when their product is being used. But not all software needs to be delivered as a service. Some data storage solutions are more useful if they’re offered as a perpetual license rather than a subscription. Here are some pros and cons you should consider before moving forward with either option.

The Pros of Charging for Data Storage Rather Than SaaS

Businesses will generally be more likely to pay an up-front fee for software than a subscription. This means you’ll have more predictable, reliable revenue, and you’ll be able to plan for future growth. You’ll also be able to create a much more robust product since you’ll have a larger budget for development. If your product is an ad-free model, you can charge a one-time price and still be competitive with services. Consumers also tend to find perpetual licenses less confusing than subscriptions. This can be helpful if you want to market your product to a broader audience.

Pro: Your Product Can Be Licensed Independently of Other Services

Users will often be more inclined to purchase a perpetual license than a subscription. This means you can charge them once and then let them use your product as long as they like, regardless of whether the service is still in use. You can also offer your product as an add-on for current customers. For example, a cloud storage company might grant unlimited storage for perpetual license holders. This is both easier to monitor and more profitable than a subscription model. You’ll know exactly how many people are using your product, and you’ll be able to set the price based on consumer behavior and needs.

Pro: You Can Set the Price Based on Consumer Behavior and Needs

If you offer a subscription rather than a license, you’ll have to constantly review features and services to keep up with market standards. This can be a difficult process, especially if you’re a smaller company. If your product is a perpetual license, you can set the price based on consumer behavior and needs. For example, a high-quality photo editing software might cost $300 and 10,000 photos. A consumer with a lighter editing needs might only have to pay $150 for the same product. With a subscription model, you would likely have to charge the heavier consumer the same as the lighter consumer. With a perpetual license, you can charge each consumer based on what they need and pay for.

Pro: A Perpetual License Offers More Flexibility With Advertising

If your product is a subscription, you’ll need to decide whether or not it makes sense to advertise it. Advertising is a great way for startups to generate word-of-mouth and drive growth. However, it can be hard to make the numbers work with a subscription model. A perpetual license, on the other hand, allows you to advertise your product without worrying about cannibalization. You can generate higher sales with advertising while still offering your customers a product they are willing to pay for.

Pro: Your Product Can Be Licensed to Other Companies

Some companies specialize in reselling perpetual licenses rather than subscriptions. A good example of this is software designed for virtualization. This kind of software is designed to host an instance of an operating system and RAM on a single machine. Companies might want to host an instance of Windows on a single Mac computer to have a Windows-compatible computer for design purposes. You can charge a company $100 for a Windows license and $50 for a Mac license. This will cost the company $150 in total, which is a significant discount from the price of a one-time purchase. By licensing your software to other companies, you can greatly increase your profit margin.

Con: It Requires a Bigger Initial Investment from Businesses

Consumers are less likely to pay an up-front fee for software than a subscription. You’ll have to fight for attention and make a big impact with your product to even get consumers to consider buying it. This makes building a name for yourself even more important. You’ll need a strong brand, social media presence, and/or marketing budget to get the word out. This doesn’t mean perpetual licenses are doomed. However, it is worth keeping in mind that reaching a large audience will be more difficult.

Con: Consumers Might Not Fully Understand What They’re Buying

Some consumers might be confused by the difference between the two models. If your product is a subscription, you’ll have to explain what the subscription entails. Most consumers have no idea what features are included in a cloud storage subscription, for example. A perpetual license, on the other hand, is easy to understand. Consumers will see that they’re buying a product and that they could keep using it for as long as they like. You should, of course, make sure the product is clearly labeled and easy to find.

Con: Monitoring Is Harder When the Software is Licensed Instead of a Service

If your product is a subscription, you can monitor how many people are using it and when. You can also be fairly certain that customers are using the product as intended. With a subscription model, you’ll be able to see when and where the product is being used. You’ll also be able to tell who is using it and be fairly certain they’re paying customers. However, things get a little trickier with perpetual licenses. You’ll have to rely on customers to tell you when they’re done with the product and then manually remove their data. You’ll also have less control over who is using the product and how often.

The Cons of Charging for Data Storage Rather Than SaaS

It can be difficult to build a name for yourself. You’ll need to fight for attention and make a big impact with your product to even get consumers to consider buying it. This makes building a name for yourself even more important. You’ll need a strong brand, social media presence, and/or marketing budget to get the word out. This doesn’t mean perpetual licenses are doomed. However, it is worth keeping in mind that reaching a large audience will be more difficult. If your product is a subscription, you’ll need to decide whether or not it makes sense to advertise it. Advertising is a great way for startups to generate word-of-mouth and drive growth. However, it can be hard to make the numbers work with a subscription model. A perpetual license, on the other hand, allows you to advertise your product

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