Many of our SaaS customers hate the utility pricing. It's hard to calculate costs and budget when things change every month. Our flat-rate pricing is what attracts many.

This is is a very important point, especially for larger organizations where budgeting (and closely following budgets) is extremely important.

I co-founded and sold a company that did SaaS/outsourced natural gas and electricity billing for energy retailers in deregulated markets, and cost consistency was a major reason why corporations signed fixed price energy contracts. Even though they might pay more than simply taking the spot market price, having known costs was preferable.

I don't get how flat fee is sustainable long-term if the company is cost-sensitive (which I guess is different than simply wanting a convenient and predictable budget item, which may or may not be the same thing you're talking about)

If I offer a service for a flat fee, I should keep my price higher than if you were to accept a variable budget item. If you start going over the flat fee, I'm eventually going to be taking a loss on the electricity/hardware. So naturally I might have to raise the price more quickly since I'm not likely to be a massive electricity/natural gas company. The price for SaaS/Cloud would not be as sticky as gas/electric and so the contracts would be for a shorter length.

Where-as, had you done some napkin math for cloud costs and tried your best to overestimate, you can add some additional overhead and see if you run over/under that year and adjust. You still treat it like a flat fee, but there's just a re-adjustment if you're over/under at the end of the term.

It isn't necessarily good business, but it looks good from the point of view of a decision maker with a limited budget.

I agree. It's simpler, but it's also often a lot higher. In the AWS case, you can build an app that costs almost nothing to run, until you have usage.

If you paid $10-$100/month for every component just for simplicity, a lot of things would never get off the ground. One of the big differences is Amazon has also unbundled support from their pricing.

Well, that's not actually true, you can run everything on one server and then unbundle them as you need.

A lot of startups could run on a single $20 virtual server for their first few years if they so desired.

I think between your remark and mine it's evident there's no generic recommendation, just a basket of options and the advice to learn your customer preferences.

It's what I chose instead of monthly fees. For my market this is far more palatable than a recurring subscription. I personally like it because the amount of value we capture scales with the amount we create.

It also means I skip reporting the "traditional" SaaS metrics like MRR and churn, but I don't talk to VCs much anyway.