One thing I've seen repeatedly is that companies that sell SaaS or SaaS like things and offer educational pricing (because they want to sell to universities too) are setting (initial) educational pricing that is in practice much too high. Today I'm going to work through a schematic example to explain what I mean. All of this is based on how it works in Canadian and I believe US universities; other university systems may be somewhat different.

Let's suppose that you're a SaaS vendor and like many vendors, you price your product at $X per person per month; I'll pick $5 (US, because most of the time the prices are in USD). Since you want to sell to universities and other educational institutions and you understand they don't have as much money to spend as regular companies, you offer a generous academic discount; they pay only $3 USD per person per month.

(If these numbers seem low, I'm deliberately stacking the deck in the favour of the SaaS company. Things get worse for your pricing as the numbers go up.)

The research and graduate student side of a large but not enormous university department is considering your software. They have 100 professors 'in' the department, 50 technical and administrative support staff (this is a low ratio), and professors have an average of 10 graduate students, research assistants, postdocs, outside collaborators, undergraduate students helping out with research projects, and so on around them, for a total of 1,000 additional people 'in' the department who will also have to be covered. These 1,150 people will cost the department $3,450 USD a month for your software, a total of $41,400 USD a year, which is a significant saving over what a commercial company would pay for the same number of people.

Unfortunately, unless your software is extremely compelling or absolutely necessary, this cost is likely to be a very tough sell. In many departments, that's enough money to fund (or mostly fund) an additional low-level staff position, and it's certainly enough money to hire more TAs, supplement more graduate student stipends (these are often the same thing, since hiring graduate students as TAs is one of the ways that you support them), or pay for summer projects, all of which are likely to be more useful and meaningful to the department than a year of your service. It's also more than enough money to cause people in the department to ask awkward questions like 'how much technical staff time will it take to put together an inferior but functional enough alternate to this', which may well not be $41,000 worth of time (especially not every year).

(Of course putting together a complete equivalent of your SaaS will cost much more than that, since you have multiple full time programmers working on it and you've invested years in your software at this point. But university departments are already used to not having nice things, and staff time is often considered almost free.)

If you decide to make your pricing nicer by only charging based on the actual number of people who wind up using your stuff, unfortunately you've probably made the situation worse for the university department. One thing that's worse than a large predictable bill is an uncertain but possibly large bill; the department will have to reserve and allocate the money in its budget to cover the full cost, and then figure out what to do with the unused budget at the end of the year (or the end of every month, or whatever). Among other things, this may lead to awkward conversations with higher powers about how the department's initial budget and actual spending don't necessarily match up.

As we can see from the numbers, one big part of the issue is those 1,000 non-professor, non-staff people. These people aren't really "employees" the way they would be in a conventional organization (and mostly don't think of themselves as employees), and the university isn't set up to support their work and spend money on them in the way it is for the people it considers actual employees. The university cares if a staff member or a professor can't get their work done, and having them work faster or better is potentially valuable to the university. This is mostly not true for graduate students and many other additional people around a department (and almost entirely not true if the person is an outside collaborator, an undergraduate doing extra work to prepare for graduate studies elsewhere, and so on).

In practice, most of those 1,000 extra people will and must be supported on a shoestring basis (for everything, not just for your SaaS). The university as a whole and their department in particular will probably only pay a meaningful per-person price for them for things that are either absolutely necessary or extremely compelling. At the same time, often the software that the department is considering is something that those people should be using too, and they may need a substitute if the department can't afford the software for them. And once the department has the substitute, it becomes budgetarily tempting and perhaps politically better if everyone uses the substitute and the department doesn't get your software at all.

(It's probably okay to charge a very low price for such people, as opposed to just throwing them in for free, but it has to be low enough that the department or the university doesn't have to think hard about it. One way to look at it is that regardless of the numbers, the collective group of those extra people is 'less important' to provide services to than the technical staff, the administrative staff, and the professors, and the costs probably should work out accordingly. Certainly the collective group of extra people isn't more important than the other groups, despite having a lot more people in it.)

Incidentally, all of this applies just as much (if not more so) when the 'vendor' is the university's central organizations and they decide to charge (back) people within the university for something on a per-person basis. If this is truly cost recovery and accurately represents the actual costs to provide the service, then it's not going to be something that most graduate students get (unless the university opts to explicitly subsidize it for them).

PS: All of this is much worse if undergraduate students need to be covered too, because there are even more of them. But often the department or the university can get away with not covering them, partly because their interactions with the university are often much narrower than those of graduate students.