TITLE:
Forecasting and the Role of Churn in Software-as-a-Service Business Models
AUTHORS:
Anthony E. R. Sukow, Rebecca Grant
KEYWORDS:
SaaS; Churn; Software; Subscription; Revenue Forecasting
JOURNAL NAME:
iBusiness,
Vol.5 No.1A,
March
29,
2013
ABSTRACT:
This article demonstrates a revenue
forecasting model for Software-as-a-Service (SaaS) business models. Due to the
highly predictable nature of subscriptions, a SaaS business can often project
future revenue on the basis of a few key metrics. However, understanding and
predicting the churn rate of the subscription base is critical to successful projections. The authors explain SaaS churn
and demonstrate the use of critical variables in a predictive SaaS revenue
model. The model allows a business to project future revenues based on
historical and expected customer subscription
behavior. The methodology combines research with the experience of a
senior executive in a SaaS-driven business to build the predictive platform.