SAAS services

Jonathan ZJonathan Z Posts: 1subscriber Member
What happens to a component supplier who supplies data and SAAS services to an industry of companies if the latter are consolidated into only a few vendors in a few years.
Would they buy out component supplier or force a price cut? As an example, say a component supplier currently sells 100 licenses to 100 different vendors, after consolidation, there are only 10 vendors now so I can only sell 10 licenses. What are the options that the component supplier can do then?

Comments

  • PZagottiPZagotti Houston, TXPosts: 22subscriber Bronze Level Member

    Hi Jonathan Z,

    First thing that comes to mind is if the component supplier is has the IP and requires that other 100 or 10 suppliers to use them exclusively then one of the vendors will probably try to acquire the supplier to gain a strategic advantage over their competition. 

    As for licensing as a business model, if the industry in question did consolidate to such a extreme extent then the licensing model may not be viable.  At that point I would switch to a licensing model that limited the number of the item.  That way you are getting paid a licensing fee per item not a flat license fee. 

    You would want to do that math so that you do not price yourself so high that the industry finds substitutes and cuts you out all together.

    Phillip Zagotti
    Partner
    Zagotti & Burdette CPA, LLC
    ZnBcpa.com
  • saravanansaravanan Posts: 389subscriber Silver Level Member
    SaaS (Software as a Service) is a software delivery model or a cloud service, that is a software application used in the cloud. This is an increasingly widespread model today. More and more software vendors move to the cloud. SaaS has plenty of benefits, however, there are serious risks in terms of license compliance for enterprises.
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