Pricing of Software as a Service – An Empirical Study in View of the Economics of Information Theory

Abstract

Software as a Service (SaaS) offerings are continuing to grow in importance. Due to this new form of software delivery, software vendors have to design appropriate pricing models for their SaaS offerings. This paper analyzes a) the disclosure of pricing information and b) the applied price metrics of SaaS business software building on the economics of information theory which recommends information activities (signaling and screening) in order to reduce uncertainty between providers and customers. By means of a content analysis, we investigate the websites of 300 SaaS solutions offered by 259 US-based providers. Our results reveal that especially small and young SaaS providers use their websites to communicate pricing information in terms of signaling. Regarding SaaS providers´ screening activities within the scope of this paper, we find that less than 10% of the offered SaaS solutions apply usage-dependent pricing metrics.