Buyers often explore OEM agreements as an alternative to taking on the risk and expense of acquisition. Usually it takes only a couple of negotiating sessions to reach the conclusion that OEM will be cumbersome, risky and expensive. Sometimes buyers ask not only for per unit pricing, but also for a cap on the total amount that they will have to spend. This made sense back in the bundling or gold disk days, when there was no incremental expense for each incremental sale but what about the brave new world of SaaS?
Tonight an enterprise buyer asked our client to make an offer for OEM terms, based on a price per seat per month, and an overall cap. My response: Sure, well cap it but when we hit the cap, we have to stop delivering licenses, because there is an incremental cost for each additional license that we have to serve up from our servers. . .
This is yet another reminder that a SaaS delivery model changes everything.