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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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In the evolving landscape of software delivery, open core companies face a critical strategic question: how should they price their products across different deployment models? The decision between multi-tenant and single-tenant pricing structures can significantly impact both revenue potential and customer satisfaction. This pricing challenge becomes particularly nuanced for open core companies balancing community editions with commercial offerings.
Understanding Deployment Models in Open Core
Open core products typically offer a free, open-source community version with premium features available in commercial packages. When scaling to enterprise customers, the deployment architecture becomes a key differentiation point:
Multi-tenant architecture involves multiple customers sharing the same infrastructure, with logical separation between tenants. This model offers cost efficiencies but may present concerns around security and customization for enterprise clients.
Single-tenant architecture provides dedicated infrastructure for each customer, offering enhanced security, performance isolation, and customization options—but at higher operational costs.
According to a 2022 OpenView Partners survey, 78% of enterprise software buyers expressed willingness to pay a premium for single-tenant deployments when handling sensitive data or requiring significant customization.
The Value Perception Gap
The pricing challenge stems from the substantial value perception gap between these deployment models.
Multi-Tenant Pricing Considerations
For multi-tenant deployments, pricing typically follows traditional SaaS models:
- User-based pricing: Charging per seat or user
- Usage-based pricing: Metering consumption of key resources
- Tiered pricing: Offering feature differentiation across packages
Multi-tenant environments allow providers to optimize infrastructure costs, passing some savings to customers while maintaining healthy margins. According to Gartner, multi-tenant deployments can reduce infrastructure costs by 30-40% compared to equivalent single-tenant implementations.
Single-Tenant Pricing Approaches
Single-tenant deployments command premium pricing based on several factors:
- Infrastructure overhead: Dedicated resources cost more to provision and maintain
- Enterprise value perception: Increased control, security, and customization
- Implementation complexity: More involved deployment and management requirements
Research from Enterprise Strategy Group shows that enterprises typically expect to pay 40-60% more for single-tenant deployments compared to multi-tenant alternatives with equivalent functionality.
Practical Pricing Strategies for Open Core Products
How can open core companies effectively monetize across these deployment models?
1. Base + Premium Model
Many successful open core companies establish a baseline multi-tenant pricing model, then apply a premium multiplier for single-tenant deployments:
- Base price: Standard multi-tenant pricing (e.g., $50/user/month)
- Premium multiplier: 1.5x-2.5x for single-tenant (e.g., $100-125/user/month)
This approach clearly communicates the value differential while maintaining a consistent pricing metric.
2. Value-Based Differentiation
Another approach focuses on value metrics that naturally align with deployment models:
- Multi-tenant: Priced for scale and basic functionality
- Single-tenant: Priced for enterprise features, control, and compliance
Elastic's pricing strategy exemplifies this approach, with their cloud offering (multi-tenant) priced differently than their enterprise self-managed options, which allow for greater control and customization.
3. Hybrid Infrastructure Pricing
Some open core companies are pioneering hybrid approaches:
- Core engine pricing: Based on usage or users
- Deployment premium: Additional cost for single-tenant deployment
- Enterprise features: Premium capabilities available in both models
HashiCorp has successfully implemented this strategy across their product suite, with consistent feature-based pricing augmented by deployment-specific premiums.
Real-World Case Study: MongoDB Atlas vs Enterprise Advanced
MongoDB offers an instructive case study in multi-tenant versus single-tenant pricing for an open core product:
MongoDB Atlas (multi-tenant cloud service):
- Priced based on instance size, storage, and data transfer
- Entry point around $57/month for basic shared clusters
- Simplified operations with managed infrastructure
MongoDB Enterprise Advanced (single-tenant):
- License-based pricing with significant premiums
- Typically 2.5-3x the equivalent Atlas configuration
- Includes advanced security features, private environments, and dedicated support
According to MongoDB's financial reports, their Enterprise Advanced (primarily single-tenant) revenue commands approximately 2.7x the average contract value of equivalent Atlas deployments.
Implementation Considerations
When establishing your pricing structure, consider these practical factors:
- Customer segmentation: Understand which customer segments value single-tenancy
- Operational costs: Accurately calculate the true cost of supporting single-tenant deployments
- Competitive landscape: Analyze how competitors price across deployment models
- Migration paths: Create pricing incentives for customers to move between models as their needs evolve
Finding Your Optimal Pricing Balance
There's no universal formula for pricing multi-tenant versus single-tenant deployments, but successful open core companies typically:
- Maintain transparency about the value differential between deployment models
- Align pricing with cost structure while capturing appropriate value premiums
- Create consistent metrics that span deployment models
- Offer clear migration paths as customer needs evolve
The most effective pricing strategies recognize that enterprise architecture decisions around deployment models reflect fundamental differences in customer requirements, risk tolerance, and value perception.
By thoughtfully structuring your pricing to reflect these differences, you can maximize revenue while ensuring customers deploy your open core product in the model that best serves their needs. The right pricing strategy turns deployment flexibility from a technical challenge into a significant revenue opportunity.