Yet another article that loves to talk about how important gross margin in SaaS is, but tip toes around its definition.
Out of curiosity - how does this audience calculate what is included in the 'cost' / 'cogs' part of the equation?
My take - if the cost is required to maintain the continued ability for the customer to meaningfully use the SaaS application, then it's a COGS. This would mean the following should be typically COGS:
- Fully loaded infrastructure costs (Hosting / Web Services / sys admin personnel)
- Support personnel (fully loaded personnel costs)
Also, GM for professional services and SaaS subscriptions should be maintained separately.
If you calculate GM for subscriptions appropriately, you can tell A LOT about profitability or potential for profitability of a SaaS company.
Out of curiosity - how does this audience calculate what is included in the 'cost' / 'cogs' part of the equation?
My take - if the cost is required to maintain the continued ability for the customer to meaningfully use the SaaS application, then it's a COGS. This would mean the following should be typically COGS:
- Fully loaded infrastructure costs (Hosting / Web Services / sys admin personnel)
- Support personnel (fully loaded personnel costs)
Also, GM for professional services and SaaS subscriptions should be maintained separately.
If you calculate GM for subscriptions appropriately, you can tell A LOT about profitability or potential for profitability of a SaaS company.