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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 rapidly evolving oil and gas midstream sector, SaaS solutions have become essential operational tools. However, selecting the right pricing metric for these specialized software offerings isn't straightforward. Should providers charge per seat, per transaction, or based on business outcomes? This decision significantly impacts both customer adoption and vendor profitability.
The Unique Challenges of Oil and Gas Midstream SaaS Pricing
The oil and gas midstream segment—focused on transportation, storage, and wholesale marketing of petroleum products—presents distinct pricing challenges. Unlike many software categories with standardized pricing approaches, midstream operations vary dramatically in scale, complexity, and value creation.
According to a McKinsey study, digital technologies could generate up to $250 billion of value for the oil and gas industry by 2025. However, capturing this value through appropriate pricing models remains challenging for most vendors.
Understanding the Core Pricing Metrics
Let's analyze the three primary pricing strategies and their fit for midstream software:
Per-Seat Pricing
How it works: Companies pay based on the number of users accessing the system.
Pros for midstream applications:
- Simplicity and predictability for budgeting
- Familiar model for IT procurement teams
- Straightforward enterprise pricing structure
Cons for midstream applications:
- Discourages widespread adoption within organizations
- Creates artificial limitations on value realization
- Fails to align with operational value in pipeline management, storage optimization, or transport logistics
According to Gartner, per-seat pricing is declining in specialized industrial software categories, dropping from 67% of offerings in 2015 to 48% in 2022.
Per-Transaction Pricing (Usage-Based)
How it works: Charges based on system usage—barrels processed, transactions completed, or data volume handled.
Pros for midstream applications:
- Scales naturally with customer operations
- Aligns costs with actual usage patterns
- Allows for tiered pricing structures that accommodate seasonal variations
Cons for midstream applications:
- Can create unpredictable costs during high-volume periods
- May deter utilization during critical operational moments
- Requires sophisticated metering and billing systems
PwC's Digital Operations study found that usage-based pricing increased customer satisfaction by 32% in industrial software categories while extending average contract duration by 1.7 years.
Outcome-Based Pricing (Value-Based)
How it works: Pricing tied to measurable business outcomes—cost savings, throughput improvements, or risk reduction.
Pros for midstream applications:
- Directly aligns vendor success with customer success
- Justifies premium pricing when delivering substantial ROI
- Creates strong differentiation from commodity software offerings
Cons for midstream applications:
- Complex to implement and measure
- Requires deep integration with customer systems
- Demands significant trust between vendor and customer
Boston Consulting Group reports that only 12% of industrial software vendors successfully implement outcome-based pricing, but those that do achieve 22% higher customer retention and 31% greater customer lifetime value.
Finding the Right Fit: Decision Framework
Selecting the optimal pricing metric requires evaluating several factors:
1. Solution Maturity and Differentiation
Early-stage solutions: Per-seat pricing provides predictability while establishing market presence.
Established platforms: Transaction-based models align better with operational usage.
Highly differentiated solutions: Value-based approaches capture premium pricing opportunity.
2. Customer Role and Size Variance
For midstream software serving diverse company sizes, a hybrid pricing approach often works best. According to Forrester Research, 67% of successful industrial SaaS providers employ price fencing strategies that segment customers by size, complexity, or industry position.
For example, smaller operators might prefer per-transaction pricing with volume discounts, while enterprise customers might benefit from outcome-based contracts with guaranteed minimum improvements.
3. Value Measurement Capability
The more directly your software connects to financial outcomes, the more viable outcome-based pricing becomes. Pipeline optimization software that demonstrably reduces downtime by 3% can justifiably charge based on this operational improvement.
Industry Adoption Patterns
Current market trends show interesting patterns in oil and gas midstream SaaS:
- Asset management solutions: Moving toward transaction-based pricing (per asset monitored or maintained)
- Trading platforms: Successfully implementing hybrid models with base subscription plus transaction fees
- Logistics optimization: Leading with outcome-based pricing tied to transportation cost reduction
- Compliance solutions: Primarily remaining with per-seat models due to clear user delineation
Implementation Recommendations
Based on industry benchmarks and customer preferences, here's a recommended approach for oil and gas midstream SaaS providers:
Start with value-based segmentation: Different customer segments derive different value from your solution.
Implement tiered pricing structures: Create natural progression paths as customers grow usage.
Consider hybrid models: Combine a base platform fee with usage components to balance predictability with alignment.
Test before scaling: Pilot pricing approaches with select customers before full market rollout.
Build value measurement tools: Develop capabilities to track and demonstrate ROI, enabling potential shifts toward outcome-based models.
The Future of Midstream SaaS Pricing
The evolution of pricing metrics in oil and gas midstream SaaS is accelerating. According to Deloitte's Digital Maturity Index, the sector has moved from laggard to fast-follower status in digital adoption, placing new demands on software pricing models.
Looking forward, we can expect:
- Greater emphasis on value-based pricing as digital transformation matures
- More sophisticated usage monitoring enabling flexible consumption models
- Increased transparency in price-to-value relationships
- Growing acceptance of outcome-sharing models among larger operators
Conclusion: Aligning Price with Value Creation
The most effective pricing metric for oil and gas midstream SaaS ultimately depends on where and how your solution creates value. While per-seat pricing offers simplicity, transaction-based and outcome-based models better align costs with value for most midstream applications.
The winners in this space will be vendors who can clearly articulate their value proposition, measure their impact, and structure pricing in ways that share both risks and rewards with their customers. As the industry continues its digital transformation journey, expect pricing models to evolve toward more sophisticated approaches that truly reflect the value these systems deliver.