As I understand it, you are asking two questions. First, what are the ways an ISV can license their software to another party who will be reselling/delivering the application via the SaaS model. Second, how will the arrangment change if the ISV is licensing into a virtualized environment.
I think there are two different situations: Either the ISV's app is a minor component of the SaaS deliverable or it is a major component.
In both cases I would try to align the licensing metric (what you charge for) with the SaaS deliverable's value. For example number of paid users...
If you are a major value-add to the deliverable, you may even be able to get a share of revenue. Minor components can't be so demanding and may have to license on the basis of CPUs (which is a loser) or a flat fee which can be derived from a price list where prices vary by size of site/offering/customers.
In both cases, payments should align with the SaaS vendor's payment arrangements with their customers e.g. monthly. If they do paid up licenses for multi-year deals, do that.
As for virtualization, I'm not sure it figures into this discussion if you license based on the SaaS deliverable. If you license as I indicate above, who cares what the number of CPUs or instances of the app may be?
If you are stuck with a hardware based metric (CPU), then I think you have a real problem. I don't think license manager technology has come far enough to include license tracking in virtualized environments but the other moderator (Dominic) may know.
Besides, if you are a minor player, you may not be able to get the SaaS vendor to do license management.
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