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Software-as-a-Service Business Models

Authors: Eetu Luoma, Mikko Rönkkö

Category: research article

Keywords: Software-as-a-Service, Business model, Classification, Cluster analysis, Software Industry

Abstract: Software-as-a-Service (SaaS) offering is beneficial to both SMEs and corporations, who wish to outsource software-related activities and use simple and low-cost software systems. The expected pros and cons of SaaS offering and technological details are well represented in the contemporary academic and trade literature. However, comprehensive understanding on SaaS as a business model seems to be missing. By synthesizing existing literature and using survey data collected from Finnish software industry, this article reveals two different configurations and the typical factors of SaaS business model. The resulting classification contributes to understanding how software companies need to align and balance otherwise separate business model elements in order to run successful business.

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reviewer737-3 says:
Nov 28, 2011 09:01 PM

The paper discusses the different business models associated with software as a service. As such, the paper is really a survey on what has been published before, and consequently it would be fair to add word 'survey' somewhere in the title. Otherwise there is an impression that the authors are working out the different business models from ground up instead of reviewing what has already been proposed or addressed in previous publications.

In general, the paper is well written, and the plot of the paper is easy to follow from the initial introduction all the way to the main conclusion towards the end of the paper. The part that could be emphasized is the interpretation of the results, in other words spelling more directly and in particular sharply out what the numbers in the tables truly mean in terms of research and business. While the present text addresses these, it is partly written in a fashion that unnecessarily attempts to be polite and dull and to bury the real observations rather than highlighting them. Agreed, this is partly due to the academic style of writing, but I still would like you to be more frank.

I did not understand why there are two empty slots in Table 1; did you not find any remark on SaaS in these papers, or what does this mean?

Section 3 starts to talk about software companies; could you be more specific with the term? What does a software company do and how are they from other companies?

Finally there are some small typos especially in the early parts of the paper:

p. 1: "... understanding on SaaS..:" -> "... understanding of SaaS..:"

p. 1: "... refers to a type software ..." -> "... refers to a type of software ..."

p. 1: "... served from the same ..." -> "... served by the same ..."

p. 5: Something is missing from the beginning of section 4.

p. 6: "... contractor where the ..." -> "... contractor were the ..."

p. 7: "...[25] as an analysis method." -> "...[25] as the analysis method."

p. 7: "... and, thus, the consideration leaves out e.g. online games and other services for individual customers." -> "..., and thus the consideration leaves out numerous services intended for individual customers, including for example online games."

reviewer737-3 says:
Nov 29, 2011 03:18 PM

The paper was well- written and fluent with understandable argumentation. The aim of the paper to align SaaS with business model thinking is welcomed contribution to the field.

However, I was a bit confused with the usage of the business model concept. For example related to the use of “SaaS business model” → Is there such a thing than (one) SaaS business model? The authors further identified four clusters of SaaS business models which is inconsistent with this wording. So, perhaps defining/distinguishing "business model" and "business model type" concepts would clear this confusion (+ using “SaaS business models” i.e. the plural.)

References to tables missing? → At the beginning of 4th chapter (..shows the cluster profiles..) and After Table 3 (..shows three sets of descriptive..) the beginning of the sentence missing (I assume it shoud be “Table 3 ..shows..)

At the beginning of chapter 4: introducing the clusters in logical order → (Now cluster four is described before cluster three)

Describing and analyzing more deeply the differences of the four SaaS BM types/clusters through the business model elements would enrich the paper (as already stated at the conclusions by the authors). As it is now, the connection of the characteristics of different SaaS types with the Business model concept is quite thin.

Eetu Luoma
Eetu Luoma says:
Dec 16, 2011 10:41 PM

Response to the reviews:

The authors wish to thank the anonymous reviewers for their insightful comments, which enabled improving the overall quality of the submission. In the following, we refer to the reviewers comments and describe how we have addressed these comments.

First, we found both reviewers suggesting further discussion on research results. We want to clarify that in section four, "results", we merely present the results of our cluster analysis and deliberately try to restrain ourselves from making conclusions or interpretations. However, we do highlight certain things visible the two tables, and in our revision we added further pointers to the text helping readers to follow our logic. Moreover, given the two additional pages, we rewrote the concluding section, which is now discussing the practical and scientific implications of our findings in detail.

We also paid attention to reviewer's suggestion to use "survey" in the title. We find this a bit confusing and wish to point out that the present study includes both a literature review addressing the previous publications, that enabled us to discuss the characteristics of the SaaS business model and base our clustering profiles "pure-play" and "enterprise", and an empirical examination where our classification was established and further details on the different business models were revealed. The word "survey" also has somewhat different connotation in social sciences. We decided not to include "survey" in the title.

Further, we checked the use of business model in the present paper, and found it consistent. In the first paragraph of section two, we also specify that the term is used for both frameworks (like Osterwalder), for classifications (like in this study) and to describe business logic of an individual company. We acknowledge that the word has several meanings, and this is problematic in discussing business models.

Finally, all the small mistakes in the draft found by the reviewers were corrected.

Tommi Mikkonen
Tommi Mikkonen says:
Dec 20, 2011 12:27 PM

Editor Decision

Congratulations! Your manuscript has now been accepted for publication in the first peer-reviewed issue of the Communications of Cloud Software journal

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