Platforms may Change SaaS Pricing

In his usual insightful way, Phil Wainewright discusses how some of the new PaaS (Platform as a Service) vendors are tugging at the pricing of SaaS.  I have no trouble agreeing that this is going on and that with growth the SaaS market (and its many variations and extensions) was inevitaby going to reprice.

However, I'm pretty sure that some of this may be more of a new entrants exploring a new business model (and trying to claim their market share) issue and less of us understanding the end game already.  As I said in a comnent,

      "I'm concerned that we may be going through a bit of the early days of the ASP market with PaaS, with some aggressive players offering prices they like for marketing purposes but may not be able to sustain.  PaaS should cost a lot less than SaaS and some SaaS may cost too much, but please remember that you are buying the application and its support, not just some iron to run it on.  That's a major difference and deserves differential pricing. "

Many of those puffy clouds and platforms (it's hard to tell them apart) are going to be great resources for ISVs and IT departments, but they have to provide enough service to their customers and make enough money for their shareholders to keep themselves in business, too.

Too much commoditization (especially before we really understand small things like what customer expectations will be and what the cost of doing business could be) might not be a good thing. 

Comments

[friarminor]

Sounds like a bitter pill to swallow but yes, it is something for companies to offer value and be valued in return through sensible costs because to do otherwise, is to shortchange yourself and eventually when things get too tight, shortchange the customers who've come to rely on you.

Best.
alain
mor.ph

[James Blake]

We've seen a rather large vendor (with a six letter multi-coloured name) recently enter one of the markets we operate in through an acquisition.

One of the first things that happened was that they reduced their subscription down to a fraction of what it used to be.

This works to commoditise the market - exactly what those who see SaaS as a utility want.

The issue is, unlike electricity or other utilities, there are large variations in the quality of get between different SaaS vendors.

Imagine your joy at negotiating a killer deal to get water for a fifth of what you used to pay for it, but turning the tap on and getting sludge.

The driving down of prices may allow vendors with deep pockets to buy marketshare, but it stifles innovation from the companies who are trying to use the cloud computing model to solve problems using this new paradigm and move technology forward - not simply relocate our existing problems into the cloud.

The good news is that with SaaS, customers are typically not locked into the same technology refresh cycles they were under on-premises solutions and they will soon discover that you get what you pay for with SaaS, and they will be free to move to another suppler.