Here’s an interesting article which suggests the future for SaaS companies is looking more complex than we think?
Companies fret as costs soar for software subscriptions - Indianapolis Business Journal
https://www.ibj.com/articles/73599-companies-fret-as-costs-s…
Would love to hear what all the knowledgable people on this board think.
Thanks!
D
Not surprising. Cable-cutters have seen the same trend over the past two years. Businesses will be no different as SAAS firms nudge subscription prices upward on “captive” clients to enhance margins and fund feature expansion.
🆁🅶🅱
For not in my bow do I trust, nor can my sword save me.
Skimming the article it doesn’t seem it accounts for a company being able to operate with less IT staff. The whole point of SaaS is to lighten that load.
I can see the potential for subscription fatigue as mentioned relative to the CTV space, but with SaaS, companies should be able to operate with much lower head counts in IT offsetting the subscription burden.
AJ
Here’s an interesting article which suggests the future for SaaS companies is looking more complex than we think?
Companies fret as costs soar for software subscriptions - Indianapolis Business Journal
I’m afraid that the Indianapolis Business Journal writer doesn’t have a clue about SaaS companies and what they do. What an ignorant article!
Instead of having your software on your own machines that you have to buy, maintain and replace, and have special air-conditioned rooms for, etc, the SaaS company does all that for you. When you need a patch or update for a program, instead of the software sending the patch to your IT department and an IT guy has to go around to all 2,654 computers in your company to install it, in different locations around the country, over the next three to six weeks, it’s all handled instantaneously, over the web, by this SaaS company that is specialized in what it does. The next version is installed right through the cloud. Have you ever heard of a single company wanting to go back from that ease and simplicity?
No way!
Saul
first of all, I think the article has to be taken with a pinch of salt - it’s an interview with a company trying to sell, ironically, another bit of SaaS that allows you to monitor the cost of SaaS. So naturally they would tend to emphasize the cost and burden of all those SaaS subscriptions.
Having said that, I do think there is a problem inherent in the SaaS trend:
Previously, the IT department, for better or worse, would select, purchase (based on a substantial budget that goes through a fairly thorough approval process) implement and MANAGE software.
Now, software kind of creeps up on you. Someone finds something on the web that appears to be useful, so they give it a try - it’s free at first after all, or not very costly. They start building applications/use cases around it. So before you know it, the company has not only started paying more and more to the SaaS provider. The company also inadvertently invested a lot more in it - which is the time of your employees spent implementing business solutions around it. If you look at a Salesforece application for instance, a LOT of employees will have spent a LOT of time populating it with data, developing rules, reports, you name it. So by the time this appears on the radar of the CIO, you’re not only paying substantial (and growing) subscription fees, there is also a growing user base that is not inclined to let their favourite tool, into which they have invested so much time and effort, be wrestled out of their hands.
The other downside of what you could call employee/user empowerment is that SaaS applications can quickly mushroom out of control. I see that at my company who is using a cloud applications for planning and reporting. Everyone and their dog developed their own custom hierarchy, so now there are multiple similar dimensions that purport to be customer hierarchy, brand, channel. And because it’s so easy to create a new one, while at the same time in the absence of a central governing body (IT) you never quite know whether that channel hierarchy is actually obsolete or still in use/maintained, let alone maintained by WHOM, people tend to create their own hierarchy, just to be on the safe side AND because it’s so easy.
No-one wants to go back to the model of purchasing software, rolling it out, doing laborious upgrades etc. And no-one (outside the IT department) wants to go back to being bossed around by the IT department who quite often behaved like they were the true leaders of the company, because you were so dependent on them. BUT I’m sure there will be a growing recognition that IT management needs to get back into control of all the SaaS applications and how they are being used. It’s matter of security as well as efficiency.
And by the way, while it’s great that SaaS providers keep updating your software, that also means that any morning, you are bound to discover that your software suddenly behaves a little bit differently than the night before. Worst case (and I’ve seen that worst case), you are working on a time-critical report and suddenly your report doesn’t work anymore because the functionality has changed, or the data doesn’t make sense any more. In a ‘normal world’, you would test thoroughly in a sandbox before migrating your production environment to a new release, and you wouldn’t migrate on a day where you know you can’t afford downtimes. Now, that’s not your choice anymore, with sometimes unpleasant consequences.
luciuse, I have to question one aspect of your characterization. The SaaS companies we discuss here are predominantly “enterprise” solutions. I.e., either the company adopts it as a strategic part of their operations or not, but there is no fiddling around with this person and that person trying it out. Consequently, many of the aspects of the implementation are company-wide decisions, uniformly applied across the company.
Companies fret as costs soar for software subscriptions - Indianapolis Business Journal
https://www.ibj.com/articles/73599-companies-fret-as-costs-s……
Would love to hear what all the knowledgable people on this board think.
Because of views expressed about “information technology administrators” further down the thread I want to pitch in. For reference I was on both sides of the fence, as an IT seller and as an IT buyer.
Opinion pieces usually post their central thesis early on. The linked article’s is:
But over time, costs add up. In fact, the expense of software subscriptions—on a per-employee basis—is now rivaling the sky-high costs of providing employees and their families with health insurance. As a result, the proliferation of SaaS has become a big problem for the companies that use it and a giant headache for many information technology administrators.
It has three parts:
1- “over time, costs add up” Right. Would you be willing to pay $1,839,302 for a million dollar property? That’s what you pay for a million dollar property 10% down and a 30 year 5% mortgage. The thing is that over those 30 years you have enough income to cover the $4,831 a month payment but you don’t have the million bucks just yet. You have to look at ongoing business dynamically, not statically. I pay $35 a month to host half a dozen websites. I love it, not having to do all they do for me, maintain hardware, software, communications, upgrades, backups, protect against hackers…
2- “rivaling the sky-high costs of providing employees and their families with health insurance” True or not it’s “human interest” much used in good journalism but totally irrelevant to the issue. It’s a straw-man argument.
3- a giant headache for many information technology administrators. SaaS sure is, it’s eating their lunch! Bureaucracies have survival at the core of their mission and IT administrators are no different. Early on IT almost killed easy-to-use Mac because hard-to-use WINDOZE was their bread and butter!
Just so you don’t think I’m holding a grudge, what is the driver of outsourcing, the driver of horizontal value chains instead of vertical integration? Efficiency! Productivity! The mantra is: “Keep core in-house. Outsource context.” My favorite example is restrooms. You can’t run a restaurant without clean restrooms but have you ever heard anyone say: “Let’s go to Joe’s, they have such great restrooms!” More than likely you have heard “Not Joe’s, the place is filthy!” So Joe’s outsources restrooms and concentrates on sizzling mouthwatering steaks!
Denny Schlesinger
BTW, I stopped reading the article beyond the excerpt so if I missed something important, please let me know.