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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 competitive landscape of SaaS, open core companies face a unique pricing challenge: how to monetize their commercial offerings while maintaining an open source community. Selecting the right value metrics—the units by which you charge customers—can make or break your pricing strategy. Let's explore which value metrics work best specifically for open core SaaS models and how to implement them effectively.
Understanding the Open Core SaaS Model
Open core SaaS businesses operate on a hybrid model—offering a free, open source "core" product while generating revenue from premium commercial features. This creates a natural tension: your pricing must justify the premium offering without alienating the open source community that drives adoption.
Unlike traditional SaaS, where all features can be monetized, open core companies must be strategic about which capabilities remain free and which warrant payment.
Why Value Metrics Matter More for Open Core
For open core companies, value metrics are especially critical because:
- They create a clear differentiation between free and paid tiers
- They help justify the commercial offering's price tag
- They enable natural growth in revenue as customers derive more value
- They provide signals about which features to keep open source versus commercial
According to OpenView Partners' 2022 SaaS Benchmarks report, companies using value-based pricing metrics see 10-30% higher growth rates than those using flat subscription models.
Top Value Metrics for Open Core SaaS
1. Usage-Based Metrics
Usage-based pricing aligns perfectly with open core models because it creates a natural graduation path from free to paid.
Examples:
- Data volume processed (Elasticsearch charges based on data ingestion)
- API calls (Stripe processes a percentage of transaction value)
- Compute resources (MongoDB Atlas charges based on server specs)
MongoDB's transition to a usage-based model with Atlas helped them grow cloud revenue by over 66% year-over-year according to their 2022 financial reports.
2. User-Based Metrics
While seemingly simple, user-based pricing can be effective for open core when implemented strategically.
Examples:
- Seats with role-based permissions (GitLab charges more for admin users)
- Active users vs. registered users (Slack charges only for active users)
- External vs. internal users (Atlassian differentiates between internal team and external collaborators)
According to a ProfitWell study, user-based pricing works best when different user types derive substantially different value from the product.
3. Feature-Based Value Metrics
This is the classic open core approach—core features are free, advanced features are paid.
Examples:
- Security features (HashiCorp keeps basic functions open while charging for advanced security)
- Enterprise integrations (Grafana offers enterprise plugins as premium)
- Advanced analytics (WordPress keeps publishing free but charges for deep analytics)
4. Outcome-Based Metrics
These advanced metrics tie pricing directly to business outcomes for customers.
Examples:
- Revenue percentage (payment processors like Stripe)
- Cost savings generated (infrastructure optimization tools)
- Performance improvements (APM tools like New Relic)
Implementing Value Metrics for Open Core: Best Practices
Respect the Open Source Ethos
The most successful open core companies maintain a generous free tier that provides genuine value. According to GitHub's State of Open Source Survey, 67% of developers expect core functionality to remain free in open core models.
Your value metrics should create natural upgrade paths without crippling the open version.
Align with Customer ROI
Research from the pricing consultancy Simon-Kucher shows that 81% of successful SaaS companies can directly tie their pricing metrics to customer ROI.
Questions to ask:
- Does your customer make more money when they use more of this metric?
- Does this metric correlate with reduced costs for the customer?
- Does this metric represent an expansion of value over time?
Build Transparent Packaging Around Your Metrics
Customers should understand exactly what they're paying for and why. HashiCorp does this exceptionally well by clearly delineating open source features from enterprise features on their pricing pages.
Test Multiple Value Metrics
According to Price Intelligently, SaaS companies that test at least three different pricing models achieve 30% higher ARPU (Average Revenue Per User).
Consider implementing a cohort-based approach where you test different value metrics with different customer segments.
Case Study: HashiCorp's Open Core Value Metrics
HashiCorp provides an excellent example of open core value metric implementation. Their tools like Terraform, Vault, and Consul all follow a similar pattern:
- Core functionality remains open source (infrastructure as code, secrets management)
- Value metrics focus on enterprise needs:
- Team collaboration features
- Governance capabilities
- Advanced security controls
- Policy enforcement
This approach has helped HashiCorp grow to over $350 million in ARR while maintaining a vibrant open source community.
The Common Pitfalls to Avoid
1. Crippling the Open Source Version
Making your open source offering too limited drives community resentment. Elastic faced significant backlash when they changed their licensing model in response to Amazon's competition.
2. Disconnecting Pricing from Value
If your value metrics don't align with customer success, you'll face resistance during sales and renewals. According to Gainsight, value-aligned pricing leads to 12% better retention rates.
3. Choosing Metrics That Don't Scale
Some metrics might work in early stages but fail to grow with customer value. For example, storage-based pricing often becomes less profitable as storage costs decrease.
Conclusion: Finding Your Optimal Value Metrics
The best value metrics for your open core SaaS will depend on your specific product and market. However, the most successful implementations share these characteristics:
- They respect and nurture the open source community
- They tie pricing directly to customer value realization
- They create natural expansion paths as usage grows
- They're simple enough for customers to understand and predict
Remember that pricing is never "set and forget." The most successful open core companies continuously evaluate and refine their value metrics as their products and markets evolve.
By thoughtfully implementing value-based pricing around meaningful usage metrics, open core SaaS companies can build sustainable business models while honoring their open source foundations.