There are several methods for charging for software-as-a-service. The first involves charging a flat rate on a per player or per license basis. Method number two is a bit different, you are charged based on the amount of data you use up to a certain threshold. Finally, there are those who allow you to purchase the software license outright–and even some who allow you to use the storage on their digital sigange servers for no fee at all. I am going to discuss the positives and negatives of these three methods of the software-as-a-service model and how a particular deployment may benefit from one over another.
Adjustable Rate SaaS
Similar to the adjustable rate mortgages that plagued the housing and real estate market in 2006 and 2007, the adjustable rate SaaS can have the same affect if you are not careful. But it all depends on the amount of data transfer and storage your network may require. For instance, if your network requires regular updates of high-def content, then it may not be the best idea to choose a system that charges based on data transfer and storage rates. I would compare it–on a small scale–to purchasing a cell phone plan that is far below the needs of the user. Why would you ever purchase a cell phone plan whose minutes you knew you would certainly exceed? What is the requisite per-minute overage charge, $0.39? On another similar vein, I know energy providers allow for consumers to pay a monthly flat extrapolated rate for their energy bill, giving them the same bill in June as they would pay in January. Fluctuating recurring costs can be crippling if you’ve not planned for them.
Now that I’ve bashed on adjustable rate SaaS fees, let me say when they may be a good option. If you do not require regular updates to your displays, if your dynamic content can be looped on a daily schedule that doesn’t alter month to month, and if you want to “run lean” then it may be wise to purchase software whose hosting fee fluctuates some. However, this all depends on what you plan.
Flat Rate Method
Charging a flat rate for paid hosting is my personal favorite–as if you couldn’t already tell. The reason being is that it allows you to effectively plan your monthly budgets. You know exactly what you are going to pay for hosting each and every month, regardless of whether or not you have transferred 1 MB or 1 TB (let’s just say if you did transfer 1 TB, you probably got your money’s worth).
Another reason I like the flat rate method is it puts the risk of “going over” on data transfer and storage directly on the shoulders of the company hosting the network. They run the risk of losing out on revenue by having the hosted company transfer bulk amounts of data from their sign players to their sign servers. This gives the hosted company a bit more peace of mind.
Buy-out the Software
Unless a software company is getting desperate, it is unlikely they will engage in the practice of allowing for unlimited storage by simply purchasing a sign player and connecting to their server farm. Quite to the contrary, most orgs would consider this as a method of leaving money on the table and, worse still, loosing money. If you think for a moment about the expense it often is to manage a redundant server farm, including the bandwidth used in transactions of digital content, the variable costs could mount. However, these options become more inviting as your network and hosting fees continue to climb. Perhaps the best method for companies wishing to grow their network organically is the SaaS-to-own option. In this scenario, you start out paying for network hosting until you reach a breakeven threshold where you plan to purchase your own equipment and host your own network. This is generally what many advertising networks choose to do, giving them the flexibility of growth and expansion without stressing about paying a grip-load of cash at the outset.
While there are a few companies currently allowing you to purchase your hardware and software outright, many do so a way to practice price waring. This has been the case lately as many entrants into the signage marketplace have had to compete on price. With the luxury item that many retailers see digital signage as, coupled with the general market slump, many digital display management software providers have been somewhat forced to slash prices, including charging hosting fees for individual players.