Rating: +0
Nadeem,
Here is the reality. If you are moving from a perpetual license model to a SaaS model; you have to be prepared to have significantly less revenue. An average perpetual license sale, for the sale of argument, is 200K for your software. That's 200K plus 15-20% yearly maint. vs. about 5K per month over 36 months. Minus the cost of the hosting infrastructure, 30%, so your top line is $3500 vs $200,000 on customer number one.
Most SaaS applications requires a strong SLA in order to be viable, this does not come cheap, and requires upfront investment and planning for on boarding customers at a secure facility. There are also several aspects to application maintenance, keeping the machines (including the OS) and telecom running or monitoring server, and network health, application maintenance for monitoring the application health, and then patch management. All of these have to be coordinated with the infrastructure provider, some you may do, some the provider will do, and some you may outsource all together, and all of these have to be "built in" to your monthly pricing.
Storage is another dimension; if your SaaS application generates significant storage you would have different charges and variables (SAN, non-SAN, levels of redundancy, etc.) for storage. You would want to take a piece of the storage revenue from the infrastructure provider in this instance. Again, the revenue is usually ramp up, where you collect the bulk of the storage based revenue towards the end of the customer contract.
Customer's will want secure access, so telecom, secure VPN access, is another facet that has to be handled, again usually by the infrastructure provider, but these costs have to be factored in to your monthly cost, usually by user.
There are many of complexities to developing a successful SaaS model, make sure you consider these well in advance. The revenue is the most significant, just do the math, you may need quite a few paying SaaS customers to generate the cash flow that you need to run the business and your always under the gun; for example if one physical server supports an average 10 target customers; and you onboard one customer; your paying 100% of infrastructure charges for that server, which may need 10 customers to support your monthly wholesale costs for that box. So until that box is fully loaded (10 customers) you maybe under water.
And from your own application perspective, the application needs to be a real SaaS model in order to leverage application management and provisioning; if you have to deploy a new instance for every customer with its own administration, config etc. without the concept of global parameters then your cost of maintenance increases with every new customer vs. the other way around where you with each new customer you become more leveraged and cost effective.
Good Luck,
Peter
October 2008