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Looking for feedback on how to come up with a subscription based pricing option for a traditionally priced piece of software.

Even though our product is not a hosted service (yet), we have several pilot customers asking us about an option to pay for our software on a subscription vs. up-front basis.

For purposes of this discussion, given a software product priced at $1495/seat plus 20% year support and maintenance (after the first year), what would you consider a fair monthly fee for a pay-as-you-go (no contract) monthly subscription and what is the justification behind your pricing model?

My initial thoughts:

A monthly subscription fee that's between 6.5% to 10% of the retail price. Using the above example, a monthly subscription price would be between $99.95 and $149.95 with a break even period between 10-15 months.

Anyone have any better ideas or reference to a scientific way to approach this question?

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I have found an interesting article about how to calculate the cost of SaaS. The article affirms that Pay-as-you-go pricing might just mean forgoing software as a service altogether.

It might be useful for you to take a look at it in order to see some figures and numbers you might be interested in.

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J. Venture: Great article. That's just the type of information I was looking for to use as foundation for our subscription pricing. Thank you! – mgreene-bdurham-com Feb 5 at 7:35

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