Glossary > Cost of Goods Sold (COGS)

Cost of Goods Sold (COGS)

Cost of goods sold (COGS) is an accounting term that refers to the direct costs associated with producing or delivering a product or service. For SaaS (Software-as-a-Service) companies, COGS typically includes the costs associated with delivering their software services to customers, such as hosting fees, licensing fees, and support costs.

COGS is an important metric for SaaS companies because it directly impacts their gross profit margin, which is a key indicator of their financial health. By understanding and managing their COGS, SaaS companies can ensure they are pricing their services correctly and optimizing their profitability.

To calculate COGS for a SaaS company, start with the direct costs associated with delivering their software services to customers. These fees include:

Hosting Fees: The cost of hosting the software service on a cloud provider, such as Amazon Web Services (AWS) or Microsoft Azure.

Licensing Fees: The cost of any third-party software licenses required to deliver the service.

Support Costs: The cost of providing customer support for the service, such as salaries for support staff or outsourced support services.

Bandwidth Costs: The cost of transmitting data to and from the software service, including costs associated with data transfer and network infrastructure.

Once you have identified these costs, you can calculate the COGS for a specific period by adding up all of the direct costs associated with delivering the software service during that period.

Explore SaaS Topics

Explore XaaS Topics

Discover and learn all about SaaS, XaaS, and the Cloud.

Glossary Terms


Your go-to resource to break down the key terms you need to know about XaaS.

Ready to learn more about CloudBlue?

CloudBlue is a powerful XaaS platform that will help you grow revenue. Here are some resources for more information:

Subscription and Billing Management

Subscription and Billing Management

Our flexible subscription and billing solution can handle the most complex XaaS business models – and scale recurring revenue.

Partner and Channel Management

Partner and Channel Management

Cut through complexity and see more revenue from your channel business as you easily onboard and enable resellers across the globe – at scale.

Vendor and Product Information Management

Vendor and Product Information Management

Centralize all of your vendor and supplier contracts and streamlined product information on one platform.

Ready to
get started?

Sign up or talk with a CloudBlue
expert today to get started.

Let's talk