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Our Recurring Payment Pricing Was Rejected

jerviswhitley.com

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Re: Our Recurring Payment Pricing Was Rejected

#41

Post by tumba »

patio11 wrote: post #15

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…

This is a common scenario for me. My contract generally includes the following provision.

"Client shall have a perpetual, irrevocable, nontransferable license to use and copy the materials and deliverables created, discovered, invented, developed or prepared in the course of this agreement (“Deliverables”) and prepare derivative works based on the Deliverables for its internal use. All other rights in the Deliverables remain in and/or are assigned to Consultant."

Re: Our Recurring Payment Pricing Was Rejected

#42

Post by alan_cx »

ck2 wrote: post #3

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.

Cars degraded over time, software does not. Get in a 10 year old car and it isnt as good as it was 10 years ago. Its loose and worn. Fire up 10 year old software and its as good as the day you bought it. Yeas the market would have changed around both, but if I have both a car and a piece of software in my hand, as it were, I can see the difference. There for leasing something the clearly degrades makes sense. Leasing something that does not degrade, does not.

Re: Our Recurring Payment Pricing Was Rejected

#43

Post by keithpeter »

ricardobeat wrote: post #11

> Suddenly your $20 per month product looks very expensive once it has been multiplied by 10, 50 or 100 years Doesn't look expensive at all to me. These are values I imagine spending on toilet paper. $2k / 10 years $10k / 50 years $20k / 100 years

I like the analogy but that is expensive toilet roll you have there.

I think part of the issue is data migration after the SaaS contract is cancelled. To pursue your analogy further, if you decided to go 'natural' and use leaves you would still be able to defecate...

Re: Our Recurring Payment Pricing Was Rejected

#44

Post by john_w_t_b »

patio11 wrote: post #15

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…

This is a common arrangement for consultants in the ERP sector. It's a nice way to start a software business. Your customers provide you with seed capital, user requirements and a reference site. I've seen a couple of people start multi-million dollar businesses with this approach.

Re: Our Recurring Payment Pricing Was Rejected

#45

Post by djt »

mynegation wrote: post #19
patio11 wrote: post #15

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.

That is true, but would cost orders of magnitude more to do that.

Re: Our Recurring Payment Pricing Was Rejected

#46

Post by valdiorn »

I'd like to offer my opinion as someone who LOATHES the SaaS model.

The first and only thing you need to consider is who you're selling to (power systems engineering businesses, as you said) and what they do.

They make power systems that need to be reliable and last for fifty years or more.

You probably know banks use 30 year old COBOL software to make the world tick. Why? Because it's reliable and rarely breaks. When it breaks, they have people there to fix it. Same goes for power and manufacturing industries, they have old control systems that rarely break, because failures are very expensive.

So now you come along trying to sell them software as a service. Can you GUARANTEE that your service will be available for the next ten years? Of course you can't, you can almost guarantee that is WON'T.

So now maybe you understand why they want to BUY the product and maintain ownership of it; because that means they can manage the risk, they don't have to trust you.

And this is why I never, ever buy SaaS, because I don't trust that whoever is providing me that service is going to be there next year, or even next month (the only exception is recreation, because if Netflix shuts down tomorrow, I don't lose any value). That's why I don't use an online album to store all my photos, why I don't use SkyDrive to store all my personal documents, because I can't TRUST them.

tl;dr: SAAS == No trust (in my opinion). Either you don't trust your client (like Adobe are doing with Creative Suite) and the client can't trust you, because despite your best intentions you just can't guarantee that you'll stay in business for the next fifty years.

Re: Our Recurring Payment Pricing Was Rejected

#47

Post by beat »

This is relevant to my interests. As I develop my own enterprise SaaS product, my first-pass solution was to develop first as SaaS (to reduce my time to market), and later make an "enterprise" version that they could install themselves, on their own hardware, using a more traditional pricing model. I was dreading this because it sounds like a lot of work and support, but then my target market is businesses that have pretty severely broken internal processes, so they're probably backwards about pricing as well.

I brought this up with a friend who works in enterprise sales and he cautioned me against it. His company did the same thing - for a while. They found it so problematic to support the "enterprise" version that it wasn't worth it, and now they're a pure SaaS play. They find it easier to solve the problem on the sales side (convince customers to go SaaS, and skip the ones that won't), than to "give the customer what they want".

I suppose this is a case of choosing your customers.

Re: Our Recurring Payment Pricing Was Rejected

#48

Post by matwood »

ringmaster wrote: post #10

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 used to work in a large company with internal IT that also used quite a few SaaS providers. To your point #1, yes the providers had to provide up front how they would get our data out if we wanted to switch. They didn't have to switch it, but provide the data in a typical format (CSV, tab delimited, etc...).

Why we used SaaS was a mix of we didn't want to find and internalize the knowledge of having to do it ourselves (think payroll complexities) and we liked the flexibility of easily scaling up and down the users.

What SaaS allowed us to do was focus our IT on items that added direct business value and not commodity items like payroll.

Re: Our Recurring Payment Pricing Was Rejected

#49

Post by whatusername »

michaelt wrote: post #8

A supplier who wants to switch from pay-once to pay-monthly is either going to be charging me less or charging me more. If they claim they'll be charging me less, that leaves me confused as to why they think the change is in their interests, unless they actually anticipate charging me more.

Or charging you less but reducing their costs (eg support, testing, whatever) by more than the difference

Re: Our Recurring Payment Pricing Was Rejected

#50

Post by beat »

alan_cx wrote: post #42
ck2 wrote: post #3

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.

Cars degraded over time, software does not. Get in a 10 year old car and it isnt as good as it was 10 years ago. Its loose and worn. Fire up 10 year old software and its as good as the day you bought it. Yeas the market would have changed around both, but if I have both a car and a piece of software in my hand, as it were, I can see the difference. There for leasing something the clearly degrades makes sense. Leasing…

Software does indeed degrade over time - platform support (gee, do your Windows 3.1 apps run?), security flaws, etc.
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