It seems to me companies should instead invest in open source alternatives. They could pay less, funding the development of open source alternatives and everyone wins. Blender is a good example of this.
Companies fret as costs soar for software subscriptions (2019)
61–70 of 453 posts
Re: Companies fret as costs soar for software subscriptions (2019)
#62This trend has the potential to be a win-win for vendors and customers. Vendors get a more stable and predictable source of revenue, while customers move their pesky lump sum cap-ex to the smoother op-ex payments. Now the question is are those SaaS offerings priced correctly for this to remain sustainable, or will all this break at some point (perhaps catalyzed by an economic slump).
The financial accounting standards board updated their guidance in late 2018 to require calculating the present value of expected future SaaS agreement payments and adding that to the balance sheet, so it’s still CapEx in most cases.
Re: Companies fret as costs soar for software subscriptions (2019)
#63Earlier quoted context omitted.
Exactly this. Unfortunately, way too often I see execs saying "that's too expensive, we just have to do it manually" instead of using good tool. Then what happens is somebody making $100+/hour would spend several hours to do the job that would be covered by a tool that costs under $50/month.
Because most business in the United States is done despite the management, not because of it.
> Because most work in the world is done despite the management, not because of it.
FTFY
Re: Companies fret as costs soar for software subscriptions (2019)
#64Earlier quoted context omitted.
Exactly this. Unfortunately, way too often I see execs saying "that's too expensive, we just have to do it manually" instead of using good tool. Then what happens is somebody making $100+/hour would spend several hours to do the job that would be covered by a tool that costs under $50/month.
> Then what happens is somebody making $100+/hour would spend several hours to do the job that would be covered by a tool that costs under $50/month. Sure, but then there's the slightly more complicated economic calculus: do we build our own tooling now, for a significant up front cost, or do we buy the SaaS which we might use essentially forever for an unknown future TCO?
How often do you build in house tooling or applications that have no ongoing operating commitments?
It's upfront capital investment plus generally unpredictable maintenance vs. More predictable but maybe higher operating expenses
Re: Companies fret as costs soar for software subscriptions (2019)
#65Earlier quoted context omitted.
> Then what happens is somebody making $100+/hour would spend several hours to do the job that would be covered by a tool that costs under $50/month. Sure, but then there's the slightly more complicated economic calculus: do we build our own tooling now, for a significant up front cost, or do we buy the SaaS which we might use essentially forever for an unknown future TCO?
Nothing complicated about it. You start with SaaS, validate it's a good tool to have/actually used, evaluate monthly costs vs opportunity costs, build your own when/if it makes sense. The slightly more complicated question is "do we invest in optimizing SaaS costs/utilization? Or use those resources to start building our own?". But even for this question the right answer is usually fairly obvious.
It is complicated at scale and over time though. Look at Saas infrastructure: How you do it as you grow constantly changes the results of any evaluation.
Re: Companies fret as costs soar for software subscriptions (2019)
#66SaaS is really one of the only ways to make money and build a company with software these days. Decades of piracy have pushed most companies to create a subscription service where the software can't just be copied.
Re: Companies fret as costs soar for software subscriptions (2019)
#67Earlier quoted context omitted.
SaaS companies are more likely to be contributing back to open source software than individual Enterprise users though.
I would like to see proof of this assertion. PRs are one thing, dollars are what matter. You can't eat code commits.
Citation: I run a SaaS company which contributes PRs, in kind contributions and dollars to key open source projects that we use.
Re: Companies fret as costs soar for software subscriptions (2019)
#68If you are already spending >$200K per employee, spending another $10K to make them even 10% more productive is a bargain.
Exactly this. Unfortunately, way too often I see execs saying "that's too expensive, we just have to do it manually" instead of using good tool. Then what happens is somebody making $100+/hour would spend several hours to do the job that would be covered by a tool that costs under $50/month.
Then what happens is somebody making $100+/hour would spend several hours to do the job that would be covered by a tool that costs under $50/month.
It's never that simple, though, is it? Suppose that tool solves a problem that a $100/hour employee would have solved manually in a day. How long did it take the employee to identify and choose the tool, arrange the purchase, and then learn to solve the problem using it? Probably a few hours too. So that $50/month tool had better be useful for replacing that job several times in a year or it's unlikely to be a net win in terms of time and money. It's certainly possible that good tools are far better than that cost/benefit ratio and using them is easily justified, but I'm guessing that in these organisations with hundreds of different SaaS subscriptions only a few of them are in that class.
Of course the elephant in the room is that there used to be another alternative, which was buying a tool outright for say $1,000 and then using it indefinitely, which would be a financial win compared to an equivalent $50/month SaaS tool in well under two years. Yes, there are factors like CAPEX vs. OPEX to consider so this isn't so simple either, but ultimately paying much more money for the same thing is still paying much more money, however you slice it.
Re: Companies fret as costs soar for software subscriptions (2019)
#69Earlier quoted context omitted.
I would like to see proof of this assertion. PRs are one thing, dollars are what matter. You can't eat code commits.
Citation: I run a SaaS company which contributes PRs, in kind contributions and dollars to key open source projects that we use.
I genuinely appreciate this as a Fastmail customer and JMAP enthusiast! Are SaaS companies more nimble in their ability to provide this type of support? Most certainly. I'm just uncertain it applies broadly to SaaS companies in general.
Re: Companies fret as costs soar for software subscriptions (2019)
#70This trend has the potential to be a win-win for vendors and customers. Vendors get a more stable and predictable source of revenue, while customers move their pesky lump sum cap-ex to the smoother op-ex payments. Now the question is are those SaaS offerings priced correctly for this to remain sustainable, or will all this break at some point (perhaps catalyzed by an economic slump).
The financial accounting standards board updated their guidance in late 2018 to require calculating the present value of expected future SaaS agreement payments and adding that to the balance sheet, so it’s still CapEx in most cases.
Does such a rule only apply to SaaS with a contract term? If it applies to all SaaS/subscriptions, I feel that's not an appropriate characterization.
There's value in having options. If a company had to wind-down some operation or segment, any CapEx in that segment could be considered lost (after applying a discount equivalent to x time using a subscription service, of course). With SaaS you can just terminate any no-term-contract/month-to-month/pay-as-you-go expenses.
That flexibility is extremely valuable and makes the company more flexible. Heck, I'd argue accounting should apply an expected future cost discount to such expenses.