SaaS superstars' cynical sales schemes make them dinosaurs-in-waiting Distinguished Gartner analyst Robert P. Desisto has offered up an interesting theory: Software-as-a-Service (SaaS) giants are on the way to making themselves so bloated and cynical you'll want to find new sources of software. Desisto (who we deeply hope has collaborated with someone surnamed Cease) popped his thoughts in a …
The accounts guys love clear fixed prices; they hate the budgetary unknown of pay-as-you-go contracts. Imagine going to your boss and saying "I need about $2m for a new software rollout, but it might actually cost $7m if we like it and use it a lot, or it might just be $0.5m." It's the same principal behind mobile phone contracts with more free minutes than anybody could use: people don't want to be shocked by high bills, and would actually prefer to pay a bit more to avoid them.
Whatever as a Service *should* be cheaper by virtue of spreading usage across idle or underutilized resources. Vendors should be able to provide the same function for less than half the cost and still take a profit from the savings. Instead, they take all the savings for themselves and resources end up costing as much as or more than traditional deployments.
It looks pretty bleak right now, but I am confident that competition will eventually bring down prices to something sane.
Your typical internal business case looks at a 5 year cost and justifies spend on that basis. Adding variability into that just introduces risk, and most companies (at least in these sceptered isles) avoid risk at almost any long term cost.
Even if the vendors were to offer fully flexible costs, I'm not sure the customer would be able to budget for fully flexible charges - remember the costs may go up as well as down.
Like who cares? So out of touch. Plenty of elasticity out there in the real world. The only people who care about Gartner are self justifying CIO type folk who can't do the research for themselves 'cos they don't understand the technology.
And why on earth would you value the opinion of anyone lacks true independence and instead is paid (contracted) to conduct research? Stick to The Register (...and the other one that sounds a bit like 'urge').
Posting as anon as I am talking abut work.
I work in technical sales for a leading SaaS provider and the author is both right and wrong.
Sure we try to capture as many users as we can in the initial contract and lock customers in for multi-year deals. We do this because it provides stability and lets us plan for the future and invest in infrastructure as well as allowing us to give our shareholders and the market a better idea of what is happening in the down the road.
Of course this isn't remotely mandatory. In return for our customers making some concessions on the contract side we offer (often very substantial) price concessions. As another poster said customers generally want to have a contract that is competitively priced and predictable too.
If somebody wants to buy one license from me on a 12 month contract at list price they are more than welcome. If they expect to get the same price they would for 500 licenses on a 3yr contract they are deluded.
All B2B businesses I have encountered offer financial inducements for buying in bulk and/or future contractual commitments, I can't for the life of me figure out what is wrong or different about SaaS vendors doing it.
As for a minimum 12 month contract length, that is common in many industries too, it's just not worth taking people on for 2 months. Most SaaS vendors (mine included) offer free trials so putative customers can try before they buy.
Hope that perspective is of some use to somebody.
I also work with selling services around SaaS vendors, and the above is spot on with nearly all of them that I have worked with. While some of the major ones have complicated licensing options (thinking SFDC and others), their salespeople can usually explain the whys and whats pretty quickly.
But the REAL fail of the Gartner analyst is to think that a pricing model will drive a company out of business, in favour of another company that has the same cost structures and sales channels (which is what he is implying). Does he not THINK that such a problem could not be dealt with very quickly, by simply adjustment to the pricing sheets and terms&conditions? It would be the fix of a few months (legal approval, finance approval, etc.) for any SaaS company to change their terms of license and pricing models substantially. And that is far easier than having a new software company gain marketshare and credibility...
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