Also the margins in SaaS used to be 60%; I think for bread its much lower than that.
The bread paradox: why convenience always wins, and why SaaS isn't doomed
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Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#62The risk for SaaS isn't that customers will build their own but that the barrier to entry for competitors is lower. The Chorleywood process created mega bakeries that displaced regular bakeries because they changed the economics. AI is doing the same and fundamentally changing the economics of production. What used to take years and huge teams to build can be built by much smaller teams much faster. SaaS isn't going…
Yes, I don’t know why a lot of this articles oversee this fact. Economics of SaaS will change not because customer will build their bakeries, there will be tons of bakeries selling cheaper bread.
for enterprise level dependability and support should normally be the winner.
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#63The risk for SaaS isn't that customers will build their own but that the barrier to entry for competitors is lower. The Chorleywood process created mega bakeries that displaced regular bakeries because they changed the economics. AI is doing the same and fundamentally changing the economics of production. What used to take years and huge teams to build can be built by much smaller teams much faster. SaaS isn't going…
Yes, I don’t know why a lot of this articles oversee this fact. Economics of SaaS will change not because customer will build their bakeries, there will be tons of bakeries selling cheaper bread.
There’s a very low cost to buying bad bread: you throw it away and don’t go there again.
Connecting your business to a SaaS is very different and comes with much higher costs if you pick a bad solution.
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#64The underlying MBA principle is that companies strongly prefer to focus on their "core competencies." This makes sense because the distraction to a business could be much costlier than the extra money spent in outsourcing non-core functions. This is basically also why the cloud business was thriving even when on-prem is much cheaper in monetary terms, and why the trend will probably extend to cloud AI providers even…
> This is basically also why the cloud business was thriving even when on-prem is much cheaper in monetary terms
On-prem is almost always much more expensive "in monetary terms" when you take into account the cost of staffing the operation needed to maintain those on-prem systems, especially if a company has e.g. compliance requirements etc.
The idea that cloud is obviously more expensive is not actually supported by the economics. If it was, we'd see people leaving the cloud in droves, for competitive reasons.
There are of course cases where it can make sense for a company to do on-prem. But they're about as common as the cases where it makes sense for a company to generate its own electricity instead of using the local grid.
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#65[flagged]
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#66The common question I get asked about building my SaaS: "What's to stop customers from making their own?" Sure, if you want to put an equal amount of time into what I've built, be on the hook for maintaining the infra, probably diverge from what will end up being a stable spec, go for it. It won't be as good, it won't be as fast, you will be fighting Claude at every corner just like I did to build the right thing. Bu…
It’s not equal amount of time though. You don’t need to support all the other customers, and you also have the exact apis and their usage. Telling Claude to “reimplement” something is vastly more achievable than trying to spec and research and develop a totally novel idea. And it gets much worse for the “open core” projects - you can literally get the core and vibe code all the “premium” features and don’t pay the or…
That depends on the domain.
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#67I would disagree, but before let me acknowledge how well written article is and bread analogy is spot on. However, author complete discounted open source and ability to spin up open source software that will replicate almost 1:1 what SaaS offers without a pay-to-access requirement. Why spend thousands on integration with SaaS that you can take open source, vibe code missing features and start using? You say maintenan…
This has been true for years already though - why would anyone use confluent over just running Kafka themselves, or self host sentry, elasticsearch, gitlab, mongo, databricks or grafana?
1. Because there were no "free" support, unlike now GPTs can solve most problems without hiring expensive staff.
2. Companies payed millions on trainings specific to their solutions.
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#68I work for a SaaS and we recently had an interesting situation where we lost some smaller customers but are in the process of getting dramatically larger ones at the same time. As in, we lost some customers that were roughly 20-people companies, but gained some customers that are 100+-people companies. The ones we lost seem to have just built our solution in-house, presumably with AI helping. Conventional wisdom woul…
Seen similar. They will be back when they realise the vibe coded SaaS run by two people in a trailer park isn’t what it looked like.
A lot of the big SaaS stuff isn’t code or product. It’s support and hand holding.
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#69The point isn't that people will vibecode their own SaaS. It could mean the end of extremely high-margin software businesses, as building cheaper, better alternatives becomes easier. You'll see more people with deep domain expertise trying their hand at startups. For example, Atlassian employees with Jira expertise leaving to build niche alternatives.
Re: The bread paradox: why convenience always wins, and why SaaS isn't doomed
#70I work for a SaaS and we recently had an interesting situation where we lost some smaller customers but are in the process of getting dramatically larger ones at the same time. As in, we lost some customers that were roughly 20-people companies, but gained some customers that are 100+-people companies. The ones we lost seem to have just built our solution in-house, presumably with AI helping. Conventional wisdom woul…
That is, until a given SaaS becomes too greedy and someone identifies the core features people actually use, then spends a few weeks replicating them internally.
I think AI familiarity still varies a lot across companies and individuals. Small companies/startups often move much faster than large corporations, so that may also explain what you're seeing. Long before LLMs I worked at places where even monitoring solutions were implemented in-house because the vendors' pricing was extremely greedy.
My point is that I'm sure this will also change for some large corporations in the short to medium term. Not saying SaaS is doomed because it's obviously not and at the end of the day you want a battle-tested solution, but it does feel like the market will shrink.