Impact of Pricing Schemes on a Market for Software-as-a-Service and Perpetual Software

Juthasit Rohitratana () and Jörn Altmann
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Juthasit Rohitratana: TEMEP, College of Engineering, Seoul National University

No 201288, TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP)

Abstract: In this paper, we present an agent-based simulation system that allows modeling the interactions between software buyers and vendors in a software market. The market offers Software-as-a-Service (SaaS) and perpetual software (PS) licenses under different pricing schemes. Four dynamic pricing schemes are analyzed: derivative-follower pricing, demand-driven pricing, skimming pricing, and penetration pricing. Customer (buyer) agents respond to these prices by selecting the most appropriate software license scheme based on four criteria using the Analytic Hierarchy Process (AHP) decision support mechanism. The four decision criteria relate to finance, software capability, organization, and vendor. The simulation results show that the demand-driven pricing scheme is the most effective method but hard to implement since it requires perfect knowledge about market conditions. As an alternative, penetration pricing and skimming pricing could be used. In addition to this, it can be stated that SaaS is most attractive for small enterprises while PS is attractive for large enterprises.

Keywords: SaaS; Software-as-a-Service pricing; perpetual software pricing; agent-based simulation; Analytic Hierarchy Process (AHP); dynamic pricing; decision support; demand-driven pricing; derivative-follower pricing; penetration pricing; skimming pricing. (search for similar items in EconPapers)
JEL-codes: C15 C44 C51 C53 C61 C63 D40 D45 D81 L24 L86 M15 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2012-03, Revised 2012-03
New Economics Papers: this item is included in nep-cmp and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published in Journal of Future Generation Computer Systems Journal, Elsevier, 2012.

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http://temep-repec.my-groups.de/DP-88.pdf First version, 2012 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:snv:dp2009:201288

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