The cost of capital of tech companies has gone up - it’s actually turned positive! Shocker.
Why SaaS prices are still going up when companies are spending less
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Re: Why SaaS prices are still going up when companies are spending less
#92Another reason why I never used SaaS.
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Re: Why SaaS prices are still going up when companies are spending less
#93The cost of capital of tech companies has gone up - it’s actually turned positive! Shocker.
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Re: Why SaaS prices are still going up when companies are spending less
#94> Software price hikes are driven in part by inflation. The cost of living has surged post-pandemic in most economies. Higher electricity costs, chip shortages, and rising wages all increase the cost of doing business. Not that there hasn't been inflation, but prices have gone up much more in the last year than inflation itself has. Inflation is 3.2%, lower than the 100-year average in the U.S. It was higher a year a…
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Re: Why SaaS prices are still going up when companies are spending less
#95> Software price hikes are driven in part by inflation. The cost of living has surged post-pandemic in most economies. Higher electricity costs, chip shortages, and rising wages all increase the cost of doing business. Not that there hasn't been inflation, but prices have gone up much more in the last year than inflation itself has. Inflation is 3.2%, lower than the 100-year average in the U.S. It was higher a year a…
If the published inflation rate is significantly less than the increase in price of a wide variety of goods, then doesn’t that indicate that the inflation rate isn’t being calculated correctly? My understanding is the inflation rate should generally reflect how much more expensive things are getting each year
It's a weighted basket of goods and services meant to represent average consumer. Not everything in the basket has to increase at the same rate.
https://www.abs.gov.au/statistics/economy/price-indexes-and-...
Here is the latest quarter and each element's contribution https://www.abs.gov.au/statistics/economy/price-indexes-and-...
Re: Why SaaS prices are still going up when companies are spending less
#96Price has little to do with cost. Price should be the maximum the market can afford while still beating ones competition.
> Price should be the maximum the market can afford while still beating ones competition. This is such a frustrating perspective. I have so much respect for people who build projects and companies with a profit margin that lets them earn a comfortable living, without trying to extract as much as they possibly can from everyone around them.
Problem with this approach is your competitors who price higher will end up with a bigger pile of money which they can use to outcompete you for land, people, equipment, and other resources.
For example, you are bidding for a business, and buyer A models max profit/lowest costs, and buyer B models less profit/higher costs (such as paying employees more), buyer A is going to be able to offer more money and secure the asset.
Re: Why SaaS prices are still going up when companies are spending less
#97Greed.
Ah greed. A shame companies started being greedy in 2023.
They focused on growth before. Growth phase and then greed phase is very common in this industry, you start out offering everything for free to grow, then you remove the free offering and force people to pay to stay with you, that is the greed phase.
With diminishing access to venture capital we see companies go to the greed phase faster than usual.
Re: Why SaaS prices are still going up when companies are spending less
#98Earlier quoted context omitted.
I did a detailed price cost calculation of onprem vs AWS as I worked at a MSP. Our cost of compute and storage including DC construction over 10y was about half the cost of AWS. We also used cheap supermicro and had no service contracts or warranties we had on site staff. Their salaries were included. Small DC 2mw.
Thanks for this insight. It’s a perspective I don’t have. Did you build the site? Is it performing as expected? I know “nobody got fired for choosing AWS” but the real value seems to be in burst loads. If you have predictable, stable workloads I can see on prem or hybrid making more sense.
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Re: Why SaaS prices are still going up when companies are spending less
#99It would be interesting to see what the corresponding figures are like for on-prem, although they would be much more difficult to calculate and would vary wildly between companies. The only thing that really stood out to me was the Google storage price increase, which seems rather large, as in way out of line in comparison to our 2023 spend and 2024 budgeting. It would also be nice to see what exactly is meant by Saa…
I did a detailed price cost calculation of onprem vs AWS as I worked at a MSP. Our cost of compute and storage including DC construction over 10y was about half the cost of AWS. We also used cheap supermicro and had no service contracts or warranties we had on site staff. Their salaries were included. Small DC 2mw.
I think Cloud has never been a question of costs — it’s generally about not having to become operational experts in house and maintain that expertise as it’s not a core business function (hard for SMEs for example, to retain talent outside of overhaul and project cycles), overall desire by senior management to single source vendor management, and a “throat to choke” that keeps you from losing your job if problems arise.
These are the drivers I’ve seen, with cost a distant third, fourth or fifth. Can’t wait to see what happens this economic cycle.
Re: Why SaaS prices are still going up when companies are spending less
#100Long term rug pull on CTOs who thought the cloud would somehow be better, easier & cheaper. CTOs get lots of free credits, downsize their infra staffing. Start using the basic building blocks, but then of the basic building blocks (servers & storage) are marked up and expensive. Next, to find cost savings their org need to move deeper and deeper into alphabet soup of cloud vendor proprietary stack, at which point the…
And that's about the time they jump ship and make those repercussions someone else's problem. I'm sure those vendor kickbacks were nice.