When should enterprise customers start paying SaaS license fees?
Charge me when we go live! That's a typical line you'll get while negotiating an enterprise contract. Some customers prefer to pay for software only when it is live in production, which makes intuitive sense. However, consider the following:
You’re renting an apartment, leasing a car, and carrying a home phone plan. Yet you haven’t actually lived in that apartment, driven that car, or made any phone calls in a couple of months. So, what are you paying for!? The answer is for access.
Check this out. You are dedicating hosting capacity, database, time, effort, etc. and whether or not customers are using these services, you’re paying for them. Not charging for access invites extension after extension and you’ll see $0 in revenue at the door. Ideally, once a customer receives that coveted login, they need to cut the check. Dolla, dolla bills y’all!
But we know how hard it is to negotiate enterprise SaaS deals, so let’s find a happy medium. Expand the contract language to pre-define the launch date and offer a lower subscription price during implementation, say 50% lower. The price would then step up when the software is live. This way, some money comes in the door, and incentives are aligned to launch. There are other approaches but I find this to be the most appealing.
1:07 Alternative to fee deferment
2:38 The 3Cs of enterprise contracts