
Companies fret as costs soar for software subscriptions (2019) - roxanneonhacker
https://www.ibj.com/articles/73599-companies-fret-as-costs-soar-for-software-subscriptions
======
peteforde
This article is painfully stupid. I don't mean wrong; it's actually
intellectually insulting to the reader. "And we still don’t know where this is
going." Spare us.

First of all, being able to build an entire company faster and cheaper than
ever before by taking advantage of a massive ecosystem of SaaS tools isn't
just worth millions, it's the only reason many companies can get off the
ground.

Second, SaaS tools have displaced entire categories of information workers
that you no longer need to have in your org chart. Remember DBAs? There's an
entire generation of entrepreneurs that do not.

Third, do you know how much it costs to deploy SAP into a company and keep it
running for five years? Roughly $10M. [https://blog.cfbs-us.com/blog-1/how-
much-is-erp](https://blog.cfbs-us.com/blog-1/how-much-is-erp) That's a fuck of
a lot of Twilio.

Fourth, and the reason this "journalism" is making me #ragequit, is that
business types have been making literally billions of dollars on the backs of
open source software for decades, and they pearl clutch when someone takes
that free code, attaches customer service to it and tries to build a
sustainable business.

The problem is not the supposedly rising costs of SaaS, it's the notion that
hedge funds can use free software to legally steal without even pretending to
contribute to the projects and infrastructures that make their operations
possible.

If you ever encounter someone complaining that SaaS is cutting into their
profit margins, please give them an earful for me.

~~~
Rury
Not sure I understand you.

From your post, it sounds like you have beef with people who complain about
SaaS costs, when many SaaS products are arguably cheap, cover valuable
functions like DBAs used to, and allows many companies to get off the ground
in the first place? All while proponents of SaaS are fundamentally no
different than companies like SAP or Hedge funds that are making billions via
rent-seeking off open source software?

Yeah well, I think that's the same reason people complain about SaaS costs. I
know some SaaS software my company uses that wouldn't cost us anywhere near
what we pay for it, if we opted to build our own via open source tools and
maintained it ourselves in house...

SaaS is effectively the same as outsourcing - you're paying a third-party
service provider for software/IT functions. Companies complaining that SaaS is
cutting into their profit margins, are no different than ones complaining that
their IT department is cutting into their profit margins.

The matter is really about which is cheaper (to make in house vs buy). In some
cases it's cheaper to outsource and in other cases it's not.

~~~
pm90
> Companies complaining that SaaS is cutting into their profit margins, are no
> different than ones complaining that their IT department is cutting into
> their profit margins.

You’re betraying a fundamental misunderstanding of how software deployments
work for most businesses.

Theoretically, the choice is between an expensive SaaS product and its
equivalent OSS product which would need to be deployed in house. What this
scenario misses is that most businesses have really ineffective IT departments
which absolutely do not have the ability to:

\- deploy the OSS versions

\- guarantee an SLO for the deployment

\- provide tooling around the OSS deployment

Remember that here I’m talking about most businesses; specifically those
outside the SV bubble.

So SaaS is fundamentally different from outsourcing. The promise of
outsourcing is heavily skewed towards reducing costs and SLOs hardly figure
into consideration. SaaS tools might be expensive but they guarantee some
things. Predictability is hard to get in the software industry; SaaS
businesses promise that. Their success reveals a deep desire in the market for
predictability around software products. Unless you have a highly qualified
SRE team I doubt you can promise the SLOs promised by SaaS vendors.

~~~
RileyJames
Totally agree regarding IT effectiveness.

Outside of the tech sector, many businesses choose a saas product _because_
they want IT to have nothing to do with it.

Outsourced IT can be difficult to work with (under statement), nearly as if
they’re not on the same team...

------
crazygringo
Look, either it's worth it or it's not. Costs may be soaring, but companies
wouldn't be buying them if they weren't providing more value than they cost.
But:

> _enterprise companies are spending an average of more than $10,000 per
> employee per year on software_

Sorry but I can't wrap my head around this. Is that really accurate? Between
Office and cloud and HR/payroll and a few other tools I can imagine _$1,000_
/year. And certain employees need SalesForce or Adobe CC or whatever which
adds another, say, $500-2,000.

But I just cannot possibly imagine how an _average_ employee is using $10K
worth of subscription services?! Does anyone else think this is accurate?

~~~
SonicScrub
That number doesn't surprise me. Your quick $1000-$2000 estimate is probably
accurate for a typical office worker, but the more specialized positions skew
the average. I work in mechanical/aerospace engineering for a large company. A
lot of the software we use is very specialized and very costly. Here's the
yearly costs from the top 4 softwares I use based on a quick google search:

1) $35,000

2) $15,000

3) $10,000

4) $4,500

So I'm costing the company ~$65,000 per year in software licenses alone.

~~~
analog31
Even for a typical office worker, based on my experience at a large company,
there might be 10 to 20 enterprise apps that include:

    
    
      * Tracking work hours
      * Communicating within teams
      * Entering and managing yearly performance reviews
      * Managing IT tickets
      * Catching spyware, phishing, etc.
      * Key and click logging
      * Personality and other screenings for job candidates
      * Health insurance management
      * Jira being used outside of software development
      * Database for archiving HR announcements
      * Password management for the above
    

In general, the prosperity of a business is a balance of assets and
liabilities, and a software purchase is both, since it involves a cost.
Managers promote purchases based on a variety of factors relative to the
business and their own personal ambitions. There's no magic that makes
managers so brilliant in the face of a salesman that they only make beneficial
decisions, or that purchases are inherently beneficial, just because the
product is software.

~~~
IggleSniggle
> * Key and click logging

What kind of dystopian Corporate hellscapes have you worked in?

This is totally unacceptable. I would not submit myself to that kind of
scrutiny or micromanagement, no matter how benign the intentions of it's
implementor. Nothing good can come of it.

~~~
TuringNYC
>> I would not submit myself to that kind of scrutiny or micromanagement

In many cases, you may not even realize it is running.

~~~
brazzy
That just makes it super extra illegal.

~~~
TuringNYC
IANAL, but my understanding is: \- lots of allowances are declared by
employers in their handbooks in the US. \- unless there are specific union
restrictions and/or state provisions, it is probably not illegal

~~~
brazzy
OK, so the USA is mostly a dystopian corporate hellscape. Not that surprising,
I guess.

------
JakeWesorick
Lots of the SaaS products we use mean we don't have to hire more employees. So
I'm not sure if dollars per employee is a meaningful stat.

~~~
phkahler
No, total cost would be a better measure since there is no per-person cost to
the SaaS provider.

If you have 10,000 employees that's $100M per year in expenses. If you're just
renting payroll, purchasing, etc software for that price it'd be far cheaper
to roll your own, or pay a few people to work on OSS full time.

~~~
fludlight
Rolling your own payroll is about as good an idea as rolling your own crypto.

~~~
say_it_as_it_is
However, if you roll your own crypto payroll, the risk of one project
perfectly offsets that of the other. It's a perfect hedge.

~~~
wglb
Ah, but what if they add rather than cancel?

~~~
kaetemi
Two negatives make a positive, right?

------
robbiemitchell
You know what costs way more than SaaS? Hiring, managing, and losing people.
Leveraging high-quality people with tooling, both for individual functions and
for company-wide process, is a no-brainer.

~~~
XCSme
There is also the option of buying self-hosted products and installing them on
your own server. The setup time is usually the same, but you only pay $5/mo
for the server and maybe $100 one time for the product, instead of paying
$100/mo for the service. This is also multiplied by X, where X is the number
of subscriptions you have.

~~~
ckdarby
No. Please do not suggest this ever.

Every company I've worked at and that has gone with self-hosted products have
lost more money than paying the subscription.

Self-hosted nearly never gets upgraded because there's no budget and it can
always be cut from the budget because it'll keep functioning.

Corp IT who usually get stuck managing these become the gatekeepers. They have
nearly zero incentive to upgrade because the risk is they take down the whole
thing for longer than the maintenance window.

During this time the product innovates & none of this is usable until the
upgrade. I've seen whole teams created to build out tooling on top of Jira
only to find out if the company had spent $100k they could have upgraded and
gotten the features.

Nobody knew said features existed because nobody had been exposed to the most
recent version and we had a 4 year old version.

~~~
lvs
We self-host everything and have refused requests to update to subscription
products. Our systems are our responsibility, so outsourcing to a SaaS that
will die or get hacked tomorrow is enormous unquantifiable risk compared to
the little opportunity costs of self-hosting.

~~~
XCSme
On a less serious note, self-hosting also feels more like you do own your
business, have full control over your products and are not just a merchant
buying low and selling high.

------
munchkinship
SaaS is a disaster without controls. They make it damn hard to automatically
disable users who are no longer active. Then you have users picking competing
duplicative tools, and now users can't work together without having duplicate
accounts in each tool. Once they get you in, you've got no leverage--they'll
just keep increasing prices because you're locked in. Companies are pushing
you from perpetual license to cloud not for your benefit.

~~~
mm89
Name some examples of price increases that were unfair?

Price increases due to inflation are a necessity.

I can't see a world where I would buy a software once and use it _forever_ ,
so paying for upgrades is necessary at some point.

~~~
regularfry
There's a hell of a gap between "paying for upgrades is necessary at some
point" and "my supplier can choose when I have to pay more".

~~~
VBprogrammer
At the startup I used to work at the MD spent quite a bit of time dodging
calls from Cloudinary. Every few months we needed to be on a higher tier
package. We'd generally be tasked with optimising whichever metric was causing
the problem a coupe of times a year (deleting / consolidating versions of
various images etc).

It felt pretty shady (both his behaviour and their pricing structures).

------
paxys
If you are already spending >$200K per employee, spending another $10K to make
them even 10% more productive is a bargain.

~~~
taleodor
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.

~~~
davidajackson
Someone should build a webpage that does this:

1\. Enter salary of engineer.

2\. Enter cost per engineer of product (subscription, one time, etc.).

3\. Enter required minutes to make worth your time (setup per employee can be
factored in).

This may already exist, but if it doesn't it could be a useful tool for Saas
companies. Something you could drop into emails to potential customers ("see
how much you would save").

Would pay for this monthly if it works.

~~~
NortySpock
So, a spreadsheet?

~~~
iandanforth
Yeah but built with React and deployed on a Gcloud kubernetes cluster.

~~~
TuringNYC
It should also include "machine learning"

------
pesfandiar
This 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).

~~~
mwerd
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.

~~~
PNWChris
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.

------
Balvarez
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.

~~~
paxys
Just doing the math, telling your engineers to spend $10 worth of their time
every month contributing to an open source alternative is worthless. Building
something reasonable is going to be a lot more expensive than what they
currently spend on the software.

~~~
zozbot234
That's enough time to put some proof-of-concept code online ("scratch your
itch"), which is how successful FLOSS projects tend to start. It would be
largely self-sustaining going from there.

------
jariel
$10K seems like a lot.

If Slack is going to round out at $100/a/staff member ... then how on earth
does that number creep to $10K?

I think there might be some 'crossing of streams' in this data, for example,
perhaps they're including general services like AWS in there, which I'm not
sure makes sense because conflating product-related IT charges with other
services isn't helpful. Also relevant is the fact that said AWS product or IT
charges would be borne anyhow.

I think dividing between 'productivity/IT' kind of spending, and product-
related services would reallly help, also, comparing that $10K to historical,
non-SaaS numbers would help as well.

~~~
Androider
There's usually a few core systems like the CRM, the marketing suite, ERP (in
bigger companies) that cost literally magnitudes more than your Slack's and G
Suites. Even in a small company you may be spending most of your SaaS budget
on just the first two.

Not that companies tend to have a SaaS budget, it's more like a Sales budget,
a Marketing budget, Engineering budget etc. That's why sales and marketing
doesn't mind spending 5-6 digits on their software without sweating it if
there's clear ROI. Hey, it's probably still cheaper than a single rep or two.
If anything, Engineering seriously undervalues their time and overvalues
building their own worse versions of popular SaaS software (no, your ad-hoc
Lambda function hooked up to send an SMS is not better than PagerDuty), I see
it all the time. Software that saves you an hour a month is probably worth at
least $1K+/year as an engineer in the US, and most engineering tools are way
cheaper than that.

------
tunesmith
Trying this out: SaaS is rent-seeking. The next downturn, tons of these
businesses (disproportionately) will be demolished.

~~~
Rury
I think I'd agree.

I find SaaS is just outsourcing, and for whatever reason, management types
need to come to understand that outsourcing is not always cheaper. _It
entirely depends on the circumstances._

Most businesses typically see IT as a cost center because they don't
understand what IT is. The ones who outsource don't realize that a highly
competent IT staff will both cost a lot of money and appear like they aren't
working hard or doing a lot. So in the short term it looks like outsourcing
(SaaS) is a way for the company to save costs, than doing things in house.

Frankly, the best analogy to SaaS/outsourcing I can think of is leasing
cars...

It's cheaper in the short term to lease a car (i.e. outsource), than to buy a
car (i.e. "do in house"). However in the long run it's generally cheaper to
own a car than lease one. The exception is, if you have a need for a new car
every 2-3 years, then leasing will be cheaper than always buying a new one
every 2-3 years...

I think the same analogy applies to Renting vs Buying a house.

Anyhow, I'd argue most businesses would be better off in the long run doing
things in house, but that requires paying more for upfront for talent (which
makes such a prospect seem more expensive at first glance).

~~~
onlyrealcuzzo
SaaS seems like a trap.

Step 1) Offer artificially cheap software to replace employees.

Step 2) Attracted by low prices and productivity, employers adopt software.

Step 3) Software works. Employers lay off employees.

Step 4) SaaS vendor needs to make profit, raises prices significantly.

Step 5) Software is no longer cost-effective to employer, but employer doesn't
have employees to fall back on.

~~~
patothon
Talent pool is small and/or hard to access anyway, so even without step 3), as
a manager, you always look at ways to do more with less, and SAAS gives you
this. It's then a matter of finding the right balance.

------
ChuckMcM
This from the article: _According to a recent analysis of more than 30 million
transactions, Zylo—a local firm that helps its customers track and manage
software subscriptions—found enterprise companies are spending an average of
more than $10,000 per employee per year on software. So, for every 100
employees, companies are spending $1 million on software subscriptions._

So what would an IT department, physical plant, and software purchase prices
cost? This is an area where data scientists have had a big impact, pricing
models. Between keeping the cost "just under" the similar cost to do it
yourself, and adding the value of "you can double or halve your size without
any additional HR costs", the SaaS model gets an enterprise to be closer to
being precisely sized.

Think about how this worked in the past, you over provisioned infrastructure
based on projected growth, you sold off at a loss infrastructure you no longer
used, your business expense didn't track your actual size and always cost
more. So in that model SaaS wins pretty handily.

~~~
marcosdumay
Yeah, ok, you are assuming SaaS replaces high performance in house
applications...

That's usually not the case. SaaS usually does not replace in house machines,
and it usually does not deal with high performance applications.

~~~
ChuckMcM
Lets see:

Github SaaS - source repository, build servers, integration infrastructure.

Quickbooks SaaS - replaces DB server, DBA

Google Enterprise - replaces Web server, mail server, DNS server, chat server,
and NAS devices.

Solidworks SaaS - replaces simulation resources with cloud resources.

Slack SaaS - chat servers, administration of same.

There is an IT concept, SUDs, which is short for "Servers Under Desks." That
is a situation where an employee sets up a server do do something and it
"lives" under their desk because they don't have an official place to put it.
And then it becomes mission critical without anyone knowing and there is a big
fire drill when something disrupts the flow (employee leaves, server
crashes/fails, scaling requirement isn't met, Etc)

------
annoyingnoob
So many companies try to force you onto SaaS. Products that you previously had
a perpetual license for are now SaaS only if you want to upgrade.

O365 is the only SaaS platform that makes sense where I work. But we have a
bunch of SaaS services because that is the only way the product is offered.

I hate SaaS.

~~~
awinder
I personally hate rose-colored visions of the past, of which this is one that
I commonly run into :)

Other things I hated:

1\. yearly support contracts that were basically a necessity to purchase
alongside (very expensive) enterprise software.

2\. working at companies that had ancient versions of software running, and
needing to dig up old matching documentation (when possible)

3\. paying a large sum for a piece of software and then being "stuck" with it
due to the investment being already made

4\. the opaque sales processes that surrounded getting up & running with any
piece of software

~~~
annoyingnoob
There are plenty of software packages with perpetual licensing that do not
operate Oracle-style licensing BS and support.

My experience with SaaS support is terrible. In my recent experience, software
with Oracle-style licensing BS offer way better support.

The flip is of being 'stuck' on a version is constant updates. Oh, they
decided that the UI need a complete revamp over the weekend and now everything
runs slower as folks learn the new interface that was foisted upon them. Or a
SaaS decides to change its API and our custom integrations break. Not all SaaS
platforms are good at communicating change and preparing users for change.
Sending an email to the accounting person that paid the bill about the API
change does no one any good.

It seems we could argue this in either direction. Point is that some things I
would like to buy perpetual, for reasons, are only available as SaaS. For the
most part, in my case, SaaS isn't the best answer but in some cases I'm stuck
with it. SaaS drives up costs, and frustration levels among the staff.

------
m0zg
Opaque billing and lack of customer oversight/clue are powerful components of
this. Shit gets bought and then sits unused a lot of times. I've worked for a
company about 10 years ago which got sold IBM DB2 at a cost of $2M/yr. The
company had no use whatsoever for DB2, but paid for a few years of that until
they hired people (me) who convinced them they don't need it. It was replaced
with a MS SQL subscription which cost a "mere" $150K/yr at the time, and _was_
actually used. Some companies just have way too much money and no clue.

------
edpichler
Do you think this is expensive? Try to build on your own. Seriously, if it's
expensive it's because it's not necessary, so the problem is not the SAS cost,
but bad administration/management.

Software is like a machine, it's to automate and make you more productive. Why
would you buy a machine that makes you lose money?

If you have a management SAS software that costs 100k a year but it makes your
company more productive saving you from hiring 3 management people with salary
of 90K/year, do you think this software is expensive?

This article is horrible, ignoring a lot of variables.

------
rogerkirkness
This is almost definitely underspending. Software augmented people are so much
more productive than people alone.

------
siruncledrew
This is a case of YMMV depending on the company and how its SaaS tools are
managed. Plus, pricing could vary at the Enterprise levels for many SaaS
products depending on pricing negotiation and monthly/annual terms.

I’m sure many people have stories of their enterprises making bad decisions
when it comes to SaaS contracts - or picking the wrong tools and forcing them
on employees only to later abandon the existing tools for different tools,
further driving up the cost.

------
JackPoach
Well, this is pure alarmist. There are a number of examples of SaaS services
that are free and/or don't use per user pricing

1\. [https://www.bitrix24.com/prices/](https://www.bitrix24.com/prices/) \-
free plan and unlimited users for $199/mo 2\.
[https://basecamp.com/pricing](https://basecamp.com/pricing) \- unlimited
users, tasks, projects $99/mo 3\. [https://www.acumatica.com/acumatica-
pricing/](https://www.acumatica.com/acumatica-pricing/) \- unlimited users
pricing.

Sure, most popular SaaS (Slack, Salesforce, Trello) do charge per user. But
you can switch to Bitrix24 or Basecamp that are literally just as good as
Salesforce or Trello and pay a flat fee, if you want.

------
zcw100
Translation: Companies are pissed that the free software gravy-train is over
and how they actually have to start paying for it. This is the way it should
have been for the past decade.

~~~
jcrawfordor
What free software that enterprises were using has been replaced by SaaS?

~~~
humblebee
IRC for Slack was one that happened at a company I worked at.

~~~
jcrawfordor
There were still internal costs related to running IRC though, assuming you
weren't paying some provider to do it for you... not large internal costs, but
I don't think on a radically different scale from Slack considering that you
could also view a Slack subscription as covering a client with a lot more
features than a typical IRC setup (sure you could run a web client, bouncers,
services, but that's all increasing your internal costs).

I guess my point is that I feel like what GP refers to as "free" is actually
just "developed/operated/maintained internally"... these commercial services
are still by and large based on free software but you're paying someone else
to do the work your internal IT capability used to do.

This couples with a general trend I've observed of organizations shifting
their IT workload from inside to outside via PaaS/SaaS providers. This could
be viewed as a form of outsourcing... in the '90s enterprises were moving
their IT functions to India. Now they're moving them to a hundred different
contractors, each supporting one system.

~~~
zozbot234
Paying some provider to run a standard FLOSS service based on your needs is
going to be a hell of a lot cheaper than some bespoke SaaS solution. And
Matrix gives you those "rich client features" anyway, with a broad choice of
client-side software - so it's a better comparison than IRC.

~~~
jcrawfordor
Indeed, Vector's managed Matrix service is quite a bit cheaper than Slack. but
it's also effectively subsidized by Matrix's patreon backers, such as myself.
Not necessarily saying this is right or wrong, just that the money always
comes from somewhere.

Additionally, as a rather dedicated Matrix user and advocate, it's clearly
less stable and usable than Slack at present. See e.g. the effort towards a
complete rewrite of the Riot on mobile and significant changes to Riot on web.
Most third-party clients are not feature complete and are often rather
unstable themselves (e.g. I am a heavy user of the Weechat python plugin but
it takes expertise to get it up and running). The pricing no doubt
accommodates the fact that anyone adopting Matrix for business use is going
out on a limb to some extent.

~~~
zozbot234
> but it's also effectively subsidized by Matrix's patreon backers, such as
> myself.

I think that's the wrong way of putting it, since that Patreon money is
clearly paying for the _open_ component of Matrix. That's work that needs to
be done anyway, whether Slack exists or not, and whether businesses choose to
host their service instances via Vector or not. And it's definitely a Good
Thing that FLOSS suppliers can now get funded via those crowd-based mechanisms
- both for aligning incentives and for enhancing the overall
"community"/"bazaar" aspect that has helped make a lot of FLOSS software
successful in the past.

------
7777fps
That's a bargain really, still less than rent.

------
thorwasdfasdf
I think this problem must be just for enterprise software, where there is huge
lock in. I'm sure for nearly every super expensive subscription out there,
there are countless fewer cost competing SaaS that are being completely
ignored because the costs of switching is simply too high.

But, I'm really surprised to see them complaining about it and labeling it as
a "problem". I've always though that most software companies are incredibly
insensitive to cost and that cost almost never matters. That has been the
narrative for a long time

------
api
People haven't figured out that "SaaS will liberate you from worrying about
IT" is bullshit. All it does is change the types of problems in IT that you
have to worry about.

~~~
DoctorDabadedoo
Totally, but it gives small companies room to breath. Much easier to spend a
few hundred bucks/month on a communication tool / management software / aws
vm, etc. than pay the entry fee to a high cost self hosted service that might
not even make sense in a few months.

Problem is that most companies consider IT (and tooling) a cost , not an asset
(that needs to be taken care of, tended and re-evaluated every once in a
while), then suddenly you're stuck with a midsized frankenstein blob of
services that takes half your budget but is so damn complicated to untangle
that it's cheaper to eat the cost. Middle management hell in one paragraph.

------
knightofmars
These two sections call out the root of the problem. Both point to a lack of a
holistic approach to managing an organization's software licenses.

"According to research firm IDC, 60% of U.S. technology spending occurs
outside companies’ IT department."

...and...

"Many subscriptions, Christopher said, cost $8,000 or so a month—or about
$100,000 a year. And it’s not uncommon, he added, for subscriptions costing
$10,000 to $50,000 annually “to never be seen by the IT department.”"

~~~
nradov
And why is this a problem? In some cases it's more of a solution.

~~~
knightofmars
It may look like a solution to an individual or to a small group of people
within a company. But the following reasons are examples why it may not be.

* paying double (more than one department paying for a SaaS product that would accommodate both under the cost being paid by one of the departments)

* failure to reduce cost via group purchasing (enterprise licensing usually goes down per user as the number of users goes up)

* using products that haven't been reviewed to handle special types of data (data being put into the application that shouldn't: financial, medical, etc)

* using products without hooking them into the single sign-on solution (users who leave the company may still have access to SaaS applications and company data if they aren't being properly administered)

* using products that require a trained administrator without having one actually trained and appointed

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thorwasdfasdf
This says a lot: “We’ve seen companies buy the same subscription over and over
again—even within the same department,” he added.

Sounds like some of it is just reckless spending.

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jonathankoren
I understand why the suits love a subscription based model because it meas
steady revenue, and there's the good chance that you're subscription will be
forgotten about, which means the easiest rent to collect, but as a software
consumer, it's really hard for me to believe that the switch to subscriptions
just means you stopped figuring out reasons for someone to upgrade, so now you
have to take rents.

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michaelbuckbee
I'm a little skeptical of the numbers as they sound out of bounds but I think
the trend is clear: fewer people doing more with automation.

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riazrizvi
> Companies fret as costs soar for software subscriptions

Seems like an odd complaint. If you spend $1 on SaaS for some service you
need, you are likely saving $10 on the cost it would take to build it for
yourself. Surely the money you spend on SaaS is as much a measure of
productive economy, provided of course you use it.

~~~
jandrese
Assuming the Saas is sensibly priced, which may or may not be true in the
enterprise realm. Or may have been when you first adopted the service, but may
not be currently.

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sbinthree
I think something that isn't discussed much are the runaway effects of being a
winning platform. Even something uncorrelated (as opposed to network effects
driven) like Stripe eventually has the ability to outexecute companies of any
size and charge monopoly profits.

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duxup
For some situations whatever the given SaaS is ... that is that given
department's business.

I wonder if this isn't as much as "is it done on a computer... probabbly a
SaaS involved" and ... how many people aren't doing their business on a
computer?

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advisedwang
And how much would it cost to get the equivalent functionality with non-saas
solutions?

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thrownaway954
personally i see the reason for this is because almost all software today is
subscription based rather than a flat fee based. I know no software today that
you pay a one time fee for. everything is pay a monthly or yearly fee. the
good news is that cause of this, software is now kept up to date and new
features are added.

also, because of this, it is really hard to pirate software now. so gone are
the days when everyone in a 100 person company was running the same license
for photoshop. unfortunately, managers don't take that into account, because
they were either ignorant about it or turning a blind eye to save the company
money.

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ChrisCinelli
And after the consumer market even SaaS software is getting to a saturation
point.

~~~
ceejayoz
Time for a "manage your SaaS subscriptions" SaaS.

(I'm fairly sure this exists, actually.)

~~~
cheschire
Those are known as "vendors" and they're how the government participates in
modern subscription models due to how the acquisitions cycle works.

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chiefalchemist
The headline is deceptive, at best. What's the context?

Presuming these SaaS solutions are replacing internal dev, and internal staff
(including benefits) then less than ~$900 p/m might be a steal.

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wdb
And then you end up with things like Teams or Slacks which needs a tool like
Things and Notes to keep track of things discussed/agreed. I find Teams and
Slacks flaky and hard to search

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jcims
I wonder how much of this flows through the AWS/Azure/GCP.

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diebeforei485
"Spend per employee" is not a great metric. Most SaaS services allow companies
to hire fewer people as they expand, but this metric does not capture that.

~~~
brentm
"Most"? I don't know about that. Maybe some do but I'd say most are the same
software companies used to buy once every three years or some new thing
companies need to do (like live chat). I don't think most saas is keeping down
headcount, that's giving it way too much credit.

------
matchagaucho
The increase in OpEx is not a "runaway expense" if it's offset by reduced
CapEx (i.e. datacenters) and increased productivity.

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shapiro92
The problem for me is the pricing system. Pay per user per month? No having
100 or 101 users does not add an operational cost user*base fee.

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hyperpallium
Alternatives make it safer for buyers, maybe Sun's model: open spec, free
reference implementation, and commercial version.

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Havoc
Seems inherently biased. Only companies with lots of subs will buy
subscription management service

------
asdfman123
That's the reason we all have jobs, and keep getting recruiter spam offering
more jobs.

------
dpeck
the only way this is true is if AWS and other infrastructure services to run
the business are included in that calculation, and even then I'd doubt it
comes close to that for most any business.

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zsandwich
Crazy. Seems that a lot of these tools are purchased by single departments and
poorly integrated into rest of the org—creating more chaos and thus need for
more tools.

~~~
rolltiide
Sounds like the solution is to have a SaaS tool which shows what other SaaS
tools are being accessed by your organization.

Hm how would we make that cost more though if there aren’t that many large
organizations

~~~
aidos
[https://track.g2.com/](https://track.g2.com/)

Here you go

~~~
rolltiide
Nice, I'll copy their pricing model given the validation.

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wellthisisgreat
Wildly overpriced subscription-based products that don't have to be
subscription-based at all from the functionality standpoint

~~~
brandly
That's not even a sentence.

------
planetzero
SaaS 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.

~~~
tmpz22
I don't know, did piracy kill the music industry's ownership model or was SaaS
just more popular/lucrative/financially gamable?

My take is that SaaS is just a more predictable business model with fewer
operating complexities and easier sales funnels.

~~~
jimbokun
> did piracy kill the music industry's ownership model

yes

~~~
buttersbrian
of the artists, certainly.

------
say_it_as_it_is
Cry me a river. It would cost a lot more if it were developed in-house.

~~~
ProAm
The SAAS bill never goes down though, eventually you aren't paying for that
in-house dev anymore. Everything Ive read is that if you plan to use it for
more than 3 years going on prem/in house has a better ROI.

