Mini-case: Should we move to the cloud?

At XYZ, we’re finding new ways to deliver the software to our customers and support them with innovative pricing strategies. One of the changes we’re evaluating is to move from being an on-prem term licensing model to a cloud-based SaaS subscription.

Would you recommend the move FROM: Term License TO: Cloud based SaaS subscription model? Please explain why or why not?

As you think about your answer, consider the impact of moving to cloud based SaaS model on items below: a) Total Revenue / Gross Margin; b) Recurring Revenue c) Customer Satisfaction

d) Company Growth Rate (e) Company Valuation

Table 1: Different pricing models

	A	B	C
Name	Perpetual License	Term License	Cloud Subscription
Unit of Measure	GB of data ingested per day
Deployment	On-Prem	On-Prem	Cloud
License Term	Perpetual	One-year	One-year
Cost of license: $ for 1 GB of data ingested per day	$300	$100	$150
Gross Margin	90%	85%	70%
Estimated Volume Sold (GB ingested per day)	Yr 1: 1000 GB Yr 2: 1300 GB Yr 3: 1600 GB Yr 4: 1900 GB	Yr 1: 1000 GB Yr 2: 1400 GB Yr 3: 1800 GB Yr 4: 2000 GB	Yr 1: 1000 GB Yr 2: 1500 GB Yr 3: 1900 GB Yr 4: 2200 GB

Answer rating: 100% (QA)

1 Yes I would recommend the move to a cloudbased SaaS subscription model for the following reasons i It would allow for more predictable revenue streams Under a perpetual licensing model companies can ... View the full answer