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Some include: what if the business of the SaaS collapses? Will they be acquired, change business models, and so on. Does the price stay the same? Is the quality going to be consistent? And so on...
Same manager is probably leasing their $50k car and will just get another when the lease is up. People have a hard time putting value on what they cannot touch.
SaaS is not a fixed amount nor a fixed duration. This is custom software with no alternatives, so escaping the "lease" is going to be more costly than purchasing up front.
If I were the manager in the story, I would see the choice as
1) Pay $5,000 per year for 10 years (with substantial cost risk due to the lock-in with the sourcing company) and then have to pay $100,000-200,000 to replace the software or
2) Pay $50,000-100,000 up front without the lock-in of the sourcing company.
Since the OP says "power systems engineering" in a "government type organization", it is not surprising that the organization is not terribly price sensitive ($50,000-$100,000 is peanuts to the power industry) and the SaaS is only offering a lower yearly payment in exchange for a substantial amount of risk and a substantially higher total cost.
He's pitching the wrong angle for this company / industry.
We get IP ownership, but we don’t bill for our time at all. Instead they become our first customer to use the new tool for a lower yearly fee (including maintenance). You're taking on market and execution risk here, for which you are not receiving compensation. (Presumably you set your consulting rates high enough such that engagements are a win for you. The SaaSification option is at a discount to your rate, which y…
While this certainly happens, there are companies that do not want their codified knowledge to leak to competitors. So they lock down the IP not because they want to sell it, but just in case code happens to contain trade secrets.
I tend to reuse a lot of code from previous projects in new ones, so this is essential.
Same manager is probably leasing their $50k car and will just get another when the lease is up. People have a hard time putting value on what they cannot touch.
Leasing a car is not a good analogy because the difficulty and cost to switch cars at the end of the lease is zero (or at least well defined). Leasing a car is a fixed duration, fixed amount payment with both the costs and the duration fixed by contract. Leasing is attractive to people and organizations that want the benefit of lower monthly/yearly payments in exchange for a higher total cost of "ownership." SaaS is…
2) is a write off ad usually need multi-level approval. There is still lock-in as switching provider usually end up in a time consuming operation.
But I agree that the saas pitch for this type of industry might not have been the right choice.
In a functional business environment, any business related software you buy, will need at least three things: hardware, other software (e.g. operating systems, databases, etc) and support engineer(s). All these have recurring costs; ranging from monthly (engineers) to a few years (hardware). To know how must a software truly costs, you'll have to work out all these costs first.
Put another way, SaaS demystifies the whole TCO to a single recurring figure which you can compare to value/benefit you derive from the software.
Two other considerations for SaaS which the OP didn't discuss: i) Wise investment. Is it wise for a startup/SME to invest $XXXXXX upfront in purchasing a software while they could pay $X (a fraction of the XXXXX) for a few months/years while studying the business and pivoting if necessary.
ii) Core business. If the software is not actual core to the startup/SME line of business i.e. it is just support system, shouldn't the startup/SME let someone else make sure that it works and just use it when needed (pay for when it's needed)?
Same manager is probably leasing their $50k car and will just get another when the lease is up. People have a hard time putting value on what they cannot touch.
Not sure I understand this sentiment. This same manager would likely be buying a 15k used car outright if he's worried about paying for software over time. The problem that I have with SaaS is that most companies pursuing it's business model fail at the value option. Take Freshbooks for instance - I started using their service 3 years ago for 9$ per month. This got bumped to 14$ per month. I now have to pay 20$ per m…
Earlier quoted context omitted.
There is a serious disconnect here. Listen to the howls if someone suggests you should rent your media but have no problem telling you to rent your software.
Hmm ... you cannot compare media and software. Very little of the media produced is worth experiencing second time. So rental is natural there. Software is meant to be used continuously forever and ever. I have some exchanges that I programmed that are 15 years old now - still working peacefully ( the benefit of using PICs - they last forever). The company is no longer in business but with a soldering gun they manage…
Same manager is probably leasing their $50k car and will just get another when the lease is up. People have a hard time putting value on what they cannot touch.
There is a serious disconnect here. Listen to the howls if someone suggests you should rent your media but have no problem telling you to rent your software.
This seems especially difficult for a web-based model, and I've personally questioned why anyone would want SaaS when: 1. The company already pays for and supports infrastructure. 2. The company already has a development/IT department that can support an installed product. 3. Viable Open Source alternatives (often using open standards) exist and can be tailored specifically to the company's business needs, either by…
I—for one—love this line when you can afford it: "we have n engineers full time on this project so you can't possibly have an internal product that grows as quickly".
Comparative advantage is an incredible force.
Another aspect is the utterly strange way internal accounting is done at large companies. When you have lots of department heads trying to optimize for their departments local optima without incentive to consider the companies global optima, you often get seemingly irrational behavior. Sometimes it simply makes sense for a department to spend a whole lot of money right now as opposed to a little each month, since whe…