As a perpetual-license software vendor, perhaps considering moving to or adding business software services over the Web, such as SaaS (Software-as-a-Service), how do you avoid cannibalizing your higher-priced software license sales with your cheaper software service offering?
Certainly you need to have a well-thought-out pricing strategy to avoid channel conflict. But even better if you can develop your SaaS offering with some unique value-add business software services that perhaps are just not doable through the on-site perpetual-license model (and thus not competitive with your licensed software product).
One of the keys to developing a strong, long-lived business software service is to think out of the box in your up-front planning: what additional service can you provide if the software (and data) are being hosted and managed by you (or your channel/business partner) that cannot be done with on-site software?
Data aggregation and analysis services is an interesting idea proposed by Joshua Greenbaum in the article "Value-added SaaS: Is This SaaS 2.0?" for Datamation. The idea is that as a SaaS provider, you are managing data for a number of hosted customers, and that the aggregated results or benchmarking of that data could be useful to all your customers individually, to your partners or channel, etc. Of course, privacy concerns may be an issue and I believe it would be critical to offer customers an opt-in/opt-out option.
For example, if yours is a help desk application, then providing your customers with information about average ticket resolution times across the entire customer base would be extremely valuable to clients interested in benchmarking their resolution times against industry norms, without inappropriately sharing individual private data.
Another scenario might be one of visibility into aggregated or streamlined processes that your customer may not have previously automated, or only had limited visibility into (for example, supply-chain or customer-side processes). If through your SaaS customer and channel base, you are able to gather more data on end-to-end business processes, timelines, etc, there is unique value in that for your individual customers. A supply-chain application would be a good example here. But it is critical to be very careful in how you are using your customer's data and ensuring their up-front buyin.
What other value-add services could you offer that are unique to your particular application and usage model? To find them, I believe a careful usage model analysis of how your end user base actually uses (or could use) your application is critical to identifying the other areas you could add value with aggregated data or process information. Here are some typical questions to ask yourself:
Doing some careful up-front analysis of value-add business software services will allow you to keep the value of your SaaS offering high in your customer's minds. This will enable you to provide a higher-priced, differentiated service that is less likely to cannibalize your software license base.