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 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.
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.
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.
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...
SaaS companies generally add extraordinary value to the software that they commercialize, both for the customer and for the software itself.
You are simply mistaken regarding the cost difference between SaaS cost and having to hire an expert in an open source package (I'm simplifying for the conversation). It's not just a question of instance sizing and data transfer, or even how much it costs to pay those humans to provide support. The real cost is in terms of liability and service level. Most corporations quite simply won't take on the risk of using "raw" open source because if something goes wrong, they need someone to blame. The alternative in a real company would be to use the expensive, generic proprietary solution. They are happy to provide an SLA for $$$. Meanwhile, SaaS companies are frequently started by the core developers of open source projects, and the attention and reputation of having a company exist to promote your project tends to create a virtuous cycle of new users, training materials and PRs. It quite literally raises the tide for all boats.
I don't have any beef with the specific act of complaining about prices in general. People are indeed free to not appreciate all sorts of things. However, much like the rise of conscious consumerism, good managers and good companies - the sort of people and places you want to work for when given a choice - increasingly understand that you have to reinvest back into the infrastructure that makes our lifestyle possible.
So yeah, go ahead and install all of the locally hosted solutions you want, and feel as superior as you can, until the moment where you realize that it's utterly irresponsible for key tech talent to spend time in a growth stage startup applying patches to things in the middle of the night. If you don't figure it out, your board of directors will replace you with someone wiser.
This is a very good point, but if you use several of these SaaS, you're paying each one for their information workers. This is the same problem that makes expensive to have many streaming services for your home.
When I send an SMS with Twilio, they a) aren't going to send me a bill for the cost of employing an engineer for a year and b) are a reliable vendor I can take to my board.
To refute your example, I could send messages via three services and still be ahead because I'm paying for what I use.
> 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?
So I'm costing the company ~$65,000 per year in software licenses alone.
* 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
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.
In many cases, you may not even realize it is running.
Says the gmail, google, facebook, android user.
If you suspect that your current or former employer is monitoring people's keystrokes, please contact the appropriate authorities to start a whistleblower process.
There are often special cases in the laws for when covert monitoring is genuinely justified, for example when there is a reasonable suspicion of wrong-doing by an employee or there are serious security concerns that legitimately require stronger measures. But intrusive surveillance by default, even of employees using company resources on company time, is not permitted in these jurisdictions.
I would only add that in the extraordinary case of a legal investigation, there's still no room for vigilante spying by the employer themselves. Presumably, law enforcement would take necessary steps to intervene, not the employer.
Why bother logging keystrokes and clicks, when there is BlueCoat that in real time decrypts, reads, logs/reports, encrypts EVERYTHING that comes in and out of your PC?
I don't think specialized positions have skewed the change much towards increasing SaaS costs.
Note: those numbers are pulled out of my ass.
CryEngine 3 is notoriously $1.2 million, but I believe that's a "total cost" rather than a per seat style license.
Turned out it was just several hundred seat licenses for a bunch of commercial cad, simulation etc. software, which the companies valued at about $50k/seat.
A very cheap way to donate $200 million.
Then someone in the finance team decides the way to tackle out-of-control costs is to buy a tool to monitor installed software on all the desktops. It has another agent.
Welcome to the swamp.
A key finding:
"Over the years, we’ve seen app adoption steadily rise, across all industries and company sizes. This year, the average number of apps per customer reached 88: that’s a 6% increase from 83 apps a year ago, and a 21% increase from 72 apps three years ago. And now 10% of our customers deploy a substantial 200 apps or more. When we look at customers that have been with Okta for more than four years, they deploy an average of 190 apps."
Odds are, a good chunk of those are free but if the average subscription cost is $10/month => $10/month * 12 months * 88 apps => $10560/year aka well within the estimate cited.
Companies do stupid shit all the time. It only takes one person with authority to spend money to sign up for a service. Personally I've seen many software subscriptions that are complete garbage.
I think that's telling
If I worked for an SSO provider I think I'd be tempted to expontentially scale corporate pricing. Want just one SSO system for (say) 10 000 employees? That'll be $5000 pa. Oh you want a second one at the same company? $20k pa please. Third one? $100k.
My reasoning would be: An outfit which buys more than one is completely irrational and so they are my best target to gouge as heavily as possible because they'll be least able to do anything about it.
Lots of things are hard about M&A but it's made easier if people remember from the outset that their business exists in the world. You don't have and can't build a business which functions independently from the world, stop trying. On the technology side that means things like using FQDNs in URLs (https://webinar.mycorp.example/2020-New-Products not https://webinar/2020-New-Products)
I’m planning to request a new subscription for exactly that reason.
why change what works and redo all the work done in that system. It would require a huge expense and time cost to port to another platform.
And there’s the fact that longterm employees and more importantly managers are likely familiar with the old software and will see little reason to even test the waters with something else.
And that’s how programs like emblem stay around.
It seems like nearly every profession has high-priced software that's required: artists, engineers, accountants, lawyers, doctors/nurses, research scientists, architects, etc, are buying products from Adobe, Quicken, West Law, Reed Elsevier, Epic. None of those are small companies, yet all of them focus in somewhat niche information technology sectors. I'm struggling to come up with a profession that doesn't touch software anymore; even retail workers use point of sale and inventory software.
I do agree with your sentiment though. The software is expensive because it's so niche. The market for all of this stuff is pretty limited, meaning there's only a few products offered, and the capital required to build competitive products makes it prohibitive for a company to build their own. The companies making the software also understand their target industries intimately enough to know exactly what price the market will bare.
However, it does leave an interesting market opportunity for and engineer + domain expert to tap into the market with cheap, low-feature offerings. Or maybe we will see more companies bringing development back in-house.
It's about case and effect: seat costs for specialised tools are high because they can be. People with limited B2B experience underestimate just how much cash large corporates can throw around without even noticing, and how rarely ROI is assessed on this spending.
The development costs required to create a competitor to an industry standard product can be relatively small. (Sometimes they aren't - but they can be.) The real costs are in marketing and sales.
Quicken doesn't do anything outstandingly clever, but good luck trying to sell your new competitor to existing accountants.
Generally there's only a change if the incumbent gets too greedy and complacent, or if the industry changes significantly and a new generation of companies appears with new ideas about which software is "standard."
Some buttons are hidden behind 3 layers of scrollbars because they’ve put panes inside of panes inside of panes. It’s ridiculous...
For a company where almost all the workforce is white collar then yes, $10K seems reasonable. In fact, I'm surprised it's not more.
For a company like Wal-Mart, I'd be shocked to see that much spend on software subscription.
I am currently at roughly 40 per user. That includes MS Office 365, three mail accounts under Office 365 for the TMS / WMS suite, Wordpress and Slidebean. Hope I didn't forget nything.
On the other hand so, Catia liscences are usually part of the service (for engineering corps.) or part of the product development costs (for manufacturing corps). in both cases costs are covered by customers. Especially in Aerospace these costs are the least f the cost problems.
Fifty dollars a month is a decently pricey subscription (like a lot more than Slack, JIRA, Lucidchart, Office, etc.), and you have twenty of those for every employee?
So I guess if you're just doing some basic web development those numbers are suspect. But if you do hardware or embedded software projects $20,000/year per person is cheap.
Which is a big reason why there is so much SaaS in the first place, in both the consumer and professional world: the customer _forgets_ about this recurring cost.
At first, but value may decrease in time and companies will still be dependent because it may not be possible to take the data out, logistics, contracts, bureaucracy, etc...
Office 365 isn’t worth it but most people don’t seem to know that.
I couldn’t live without excel.
FWIW, I'm a software engineer and our IT department actually let people opt out of Microsoft office if they weren't using it to save money, and encouraging people to use Google Docs/Sheets (as most do anyways). I'm guessing a good deal of software engineers did that but there are plenty of non-engineers that probably also did outside of finance / some sales people.
I think Google gave up on trying to compete with excel on features.
In most companies, it's silly to have Office installed by default for all employees. If you need it, fine, put in a request and we'll get it done.
(please note there are a few things I'm NOT saying: 1) localc or sheets are as good as Excel for all users. 2) companies should save money by never paying for Excel, even if an employee wants to use Excel. 3) all companies should follow the rule of thumb outlined in my second paragraph.)
Maybe I could see an argument for localc, but sheets is actually pretty costly at $50-150/year.
I think it’s fine for non-business people to just use the free sheets, but an org would have to not care about excel to use sheets for everyone.
With 365, it’s sort of a no-brainer as while it’s not as good as sheets for accessibility, if I’m going to pay $100/year/user then it’s easier to plan for 365, than sheets, I think.
Where are you getting that from? I see Enterprise GSuite at $25 a user (max) and that includes mail and drive. The cost of sheets here is probably $10 or less.
It does seem like the cost is in line, but if you're already paying for Gmail/Drive or other Gsuite things then saving the office 365 cost absolutely helps and Sheets is essentially a no-cost add-on.
If I want to create a reproducible data process then I’ll build it in python and maybe some data share or database.
But tons of work can be done in excel that isn’t worth the cost to build in something else.
I don’t include Macros, if I’m programming in Excel, I should probably do that in something that is better designed.
I use Numbers. Is it as good as Excel, not really, but it's good enough (although data import is still a bit lacking), and it's not a subscription.
For larger products those will require to purchase certain usage since the workload will be higher but that's a company product cost and not per dev.
Unless one is developing MS products or is dependent on MS software I can't see how the numbers mentioned add up
Really? You can imagine only #83/mo in software costs for a working professional? I think you're being really rather unimaginative.
Considering Office 365 is $10/mo (before volume discounts) and is probably the main tool most office workers use, I am having a hard time how on earth you get to $10K/12=$833/mo.
I'm supposed to believe the average office worker uses a total of subscription software that is eighty times more expensive than Microsoft Office?
To get to those large numbers, you'll need to hand-pick companies that have few non-specialized employees.
This is becoming a joke.
In my whole life I didnt buy a one single software product, that is based on subscription model (unless necessary as there are ongoing costs for its development like antiviruses (which I dont use, but this is another story)). Why? As it tells me, the product is at the end of its inovative phase and has nothing more to offer. I am fine with paying for update hunderds of dollars if, and only if, i need the added functionality. Or in different words Microsoft Office 97 was more than enough for 99% of its users (I dare you to install it and find something that you miss, it wasn't perfect but it did get the job done).
But there is more. I wont pay for cloud products either. Why? I believe that what is giving you the "edge" is your knowlidge. Using, for instance, gmail is taking you the chance to increase it. Yeah sure, time to market, but if you stick to DIY logic, this is not going to be a problem (I can set up a mail server with left hand while coding with right hand... and offer it as a SAAS to those that ignore DIY and earn extra bucks ;) /s ). If you ignore the lack of knowlidge, you will end up always paying to someone else or stuck in a problem that wouldn't be a problem if you wouldn't be ignoring it for so long. Not to even go into lack of inovation and reinventing / copying the solutions that were solved long time ago, but this is just another story.
As for the rest of your argument, most people are not like you, as they will not want to spend time setting up their own mail server. For companies this is doubly true, as they will likely spend more money setting it up, maintaining it, and upgrading it, than the subscription actually costs.
I wonder if those same companies intend to socialize the wealth generated by their automation.
I don't like it at all.
Running the mail server is simple enough, but then you need to set up storage. Emails are sensitive and often can't afford to lose. Then you need to set up backs, monitor and regularly test DR scenarios to see if your failovers, recovery plans are operational. Of course you need to maintain your data centers as well if you don't want subscriptions.
Then think of login. Employees don't want to log in to 15 different software. So they are going to ask for SSO. You are going to have to deploy and maintain something like active directory. Sometimes they need to be maintained across networks between different offices that are far from each other. After all this, you will still have to buy support packages from principle vendors for times when things go wrong (and they go wrong all the time when you host your own stuff). Shit escalates mate.
Login is surely one of the best arguments for non-SaaS solutions. SSO is a total mess in the SaaS world. Everyone ends up with a billion passwords that they manage individually, change at different times, have to use a password manager to keep track of (but they all use different ones), etc. Active Directory is actually a solution to that which got lost in the move to SaaS-in-the-cloud.
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.
This is the kind of hubris I come to this site for.
Payroll is harder than it looks due to all the edge cases. For example, it is literally possible for an employee to have so many payroll deductions including court-ordered wage garnishment that net pay would be negative. How do you handle that in all legal jurisdictions where the company operates?
By issuing a error and demanding that a human deal with it. Obviously.
If you mean it's impractical and error-prone to do payroll manually, well that's the point of automating >99.999% of it. For the remaining <0.001%, someone is going to have decide how to deal with it, and I'm sceptical that a programmer seven years ago will know better than a lawyer today what the legal requirements today are.
You could argue that payroll shouldn't be so complex but that's the reality of it today.
Second month was a disaster in the end they had to physically cut the tape on the last remaining partially destroyed copy - about 20% got paid on time.
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.
It's worth self-hosting if you have a good reason for it, and the software is old and boring (aka "battle tested") and packaged by someone else so the lifecycle is someone else's problem.
If it can be installed/maintained/upgraded by running `apt` or `yum`, and isn't a pile of custom hacks then go for it. Server software like Apache/Postgres/MySQL or even fairly nontrivial apps like Jenkins fall into this category. You can literally run these for years, staying updated, with an insignificant amount of maintenance.
Atlassian products with the "download this tarball and run a script" update method aren't as nice as the `apt-get upgrade` you get with the items mentioned above.
Maybe it makes sense for a software company to self-host some software, but they might hire a paving company to pave their parking lot. Likewise, it might make sense for that paving company to pave their own parking lot, but use SaaS software.
Because if it's just features, then maybe the features actually aren't worth the cost of an upgrade, if no one feels incentivized to do so.
Your anecdote about Jira tooling feels like the company not doing adequate research before hiring a time. (In other words, they should have considered all options—what is the cost of upgrading versus building tooling?)
We have also paid (a lot) for DeltaDNA to have more insights into monetization, but their platform was a lot slower than our self-hosted Grafana and they even forced us to use our own S3 buckets to store the data (set them up and link them) due to GDPR (they said). Not only that, but creating custom graphs in their platform was very tedious and a bad experience overall.
I am not saying it makes sense to always go self-hosted, you are right that depending on the application you want to host you might need less or more technical knowledge and maintenance.
I would never recommend (for the average individual/company) to self-host email servers, CDNs or Slack chat server alternatives, but I do think for some applications it's worth the time, for example static pages (instead of using a website builder get a theme and host it yourself) or analytics.
Setup time may be similar; but if something goes wrong, the cost is a loss of whatever other project that person is working on to fix it (+ the mental overhead of preparing to handle fixes)
The times is a good idea is something like Confluence or JIRA where the functionality of the cloud hosted version is hobbled compared to the on-prem version. (In that case, due to plugin security.)
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.
It felt pretty shady (both his behaviour and their pricing structures).
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.
It's never that simple, though, is it? Suppose that tool solves a problem that a $100/hour employee would have solved manually in a day. How long did it take the employee to identify and choose the tool, arrange the purchase, and then learn to solve the problem using it? Probably a few hours too. So that $50/month tool had better be useful for replacing that job several times in a year or it's unlikely to be a net win in terms of time and money. It's certainly possible that good tools are far better than that cost/benefit ratio and using them is easily justified, but I'm guessing that in these organisations with hundreds of different SaaS subscriptions only a few of them are in that class.
Of course the elephant in the room is that there used to be another alternative, which was buying a tool outright for say $1,000 and then using it indefinitely, which would be a financial win compared to an equivalent $50/month SaaS tool in well under two years. Yes, there are factors like CAPEX vs. OPEX to consider so this isn't so simple either, but ultimately paying much more money for the same thing is still paying much more money, however you slice it.
Some people might hope for that. Personally, if I'm buying a tool for professional use, I want to choose my preferred one and then have it be reliable and future-proof. Things like security updates are one thing, but the last thing I want is random changes in functionality or UI being forced on me.
This worked just fine in the traditional model where you bought a version of some software, and then if there was another version released later with something more that you wanted and adequate compatibility, you bought the upgrade too. The user gets stability and new developments if they want them. The developer gets paid for new developments, though only if they are actually valuable to users. No-one gets forced into anything unexpected changing, or going missing, or breaking compatibility.
Tragically, the whole SaaS, insta-deploy anything we feel like culture that has evolved in recent years has utterly destroyed that stability and reliability. I regard this as possibly the biggest retrograde step in the history of personal computing (and that "possibly" is mostly because the walled garden culture that has also become so powerful in recent years might be a larger backward step).
Giving individual contributors purchase authority and then supervising spend -- the model implemented in every major cloud -- is a much better compromise, because it lets management prioritize where they spend ROI calculation cycles which are not free. Very not free!
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.
Once I've plugged in the values, I go back and ask if we really want to spend 30 hours a year updating intranet employee profiles or if we should use that time to fix some bugs or code a new feature.
Its quite effective to pushing back on unneeded tasks.
Here is evidence that claim CEOs produce more value than they are compensated for (i.e. they are underpaid):
Just because they are there doesn’t mean the achievements are due to them.
There have been a number of attempts, tens of millions of dollars spent on one study alone, trying to quantify what technologies and people generate value.
The meta-conclusion considering all the studies I know of (traveling and not looking them up), is the math becomes so Byzantine it’s a pointless measure and we should just stick with ideology to avoid blowing up society in people’s minds (an idea that was peddled for thousands of years already, reaffirmed by math, glad we spent the time on it.)
Just because we’ve emotionally conditioned ourselves to engage our mechanical agency towards these ends does not imply it’s because of management.
Manufactured consent is a thing.
Management is necessary to allocate resources (including labor) efficiently at scale, but it comes with overhead.
As such, at smaller companies, startups, small businesses, the overhead of management can be outsized, the pain felt acutely when compared relatively to the actual output of ICs and such.
At larger companies, the massive cadre of management which is necessary to keep the machine running is also very obvious, as the overhead of a large organization is very large, even if the management itself is excellent and highly efficient.
As such... How does one allocate credit? An analogy would be like financing or investment. Necessary. A filtering mechanism. Sometimes helpful in an advisory mechanism. But are they the ones creating output? No. But do they deserve some credit? If something cannot be done without it, then they must deserve SOME credit, it's just a question of how much.
A healthy society takes a village. IMO there’s plenty of literal history to show isolating a minority from the demands the rest of us face is ripe for abuse at scale.
One person did not invent languages, lay down the highways and invent computers.
All the people we hold up relied not just on the historical invention to push them forward but society giving them space and not killing them. Every individual inventor is outnumbered.
IMO that space to be and do is what we should optimize for. Not a tether to tradition of emotionally wanking off a handful over what is ultimately a linguistic twist on an idea that was discovered/defined collectively
At least for Medium, "Holacracy" pretty much imploded. Zsppos switched from it to an internal marketplace - which is, oddly, controlled by excecutives.
Flat organizations beyond a certain size either move away from flatness officially, create unacknowledged hierarchy, or fail. I'm really not aware of a single large-scale example that still works.
This is much different for small orgs - there's something about org size that requires some sort of centralization. (I think it's communications overhead + complexity exceeding the limit of what a single person can keep in their mind. I'm not 100% convinced, but these are the pressure points I usually see)
Flat organizations are unusual, but survive about as well as other similar organizations. The difference is when a giant reorganization/buyout etc hits, they more obviously change into something else.
Github made it all the way until 2014 (and was a massive success by then) too, IIRC.
Yeah, you can fake through it more than half of the time, comfortably. Just be eloquent, tall, and loud.
But that all aside... I mean they have a new Half Life game on the near term horizon (later this month apparently) and they have done a ton of work on VR and Linux support.
Summary: the game was brilliant ("uniquely amazing") if you were really good at it but was essentially impossible to get into, and its economy was badly constructed.
Most Startups are at least trying to change the status quo.
Steam certainly challenged the status quo when it was released, and several times in its life.
Hell, who else is working on Linux gaming right now? They were relatively early on game streaming, VR. Steam Workshop? How cool is it that a large amount of one of their flagship games, Team Fortress 2, not only integrated a lot of third party content, but also paid creators back? How cool is it that many games like Counter Strike began as Half Life mods?
I don’t really use Steam much anymore, so it’s not that I’m personally attached much, but I will admit to being pretty impressed.
Also, valve's ther ventures are....massively successful. The microtransaction model in gaming originated with Valve, and now the entire mobile and freemium gaming markets use that business model.
So in this case...I would say yes, everything valve has done as a company trying to make money in the last 10 years is par for other successful SAAS platforms.
Steam/valve was brought up because they have a successful cloud SASS model with no subscriptions oand a flat org structure.
Xbox live has a subscription fee since day 1, is maintained by MS (the definition of "non-flat organizational structure"), and is vendor locked. Not even remotely comparable.
This is what 'agile' is supposed to emulate for larger businesses.
That project died the following year, and I believe the opportunity costs of that work were substantially responsible for the demise.
They had. We sent someone eight timezones away to find that out.
Sure, but then there's the slightly more complicated economic calculus: do we build our own tooling now, for a significant up front cost, or do we buy the SaaS which we might use essentially forever for an unknown future TCO?
Absolute zero ongoing commitments? Very rarely.
Negligible ongoing commitments compared to the outsourcing alternative? Many, many times.
I don't think it's clear-cut. Some SaaS has worked out remarkably well for me and others I wish I had just built the thing in-house. Also, few providers give a way to actually get your data back out in a usable fashion, so you tend to get locked in without substantial cost to back out.
The slightly more complicated question is "do we invest in optimizing SaaS costs/utilization? Or use those resources to start building our own?". But even for this question the right answer is usually fairly obvious.
If it was so easy, why are the companies in the article "fretting"? Because putting values on "good", "opportunity" and "makes sense" (not even counting the fact you have no control over the SaaS raising prices or going out of business in the future) is harder than we can spend $400/month or $50/month.
$200K is not a good benchmark for what companies spend.
Median salary in the US is about $50K 
Average overhead per/employee is 18-26% 
So a $10K spend for 10% increase in productivity on someone earning about $60K ... is not a bargain.
But there's a problem with this, because SaaS can be
1) Individual productivity
2) Operational productivity
3) Product spending (i.e. like GMaps integration as a feature in your product)
So 1/2 and 3 represent a very different type of calculus to the point wherein that kind of spending should definitely fall into different buckets for accounting.
And the productivity increase using certain SaaS tools is not 10%, it can be an order of magnitude in certain instances.
The vast majority of users of SaaS are not software developers.
well... my productivity isn't always increased, regardless of what tools someone wants to buy. and... sometimes it's a drain on my productivity, but using tool ABC increases someone else's productivity (at the expense of mine). How do you account for the productivity increase of -5% for 30% of your employees, but 20% for the other 70%?
- Process mismatch / impedance : The software is unlikely to be able to do exactly what you want how you want. The human likely is able
- Vendor lock in: If the SaaS decides to change how it works, or the prices you now have a leaving cost
- Expenditure on someone else's competitive advantage: If you use tool X likely there is no reason your competitor cannot. You both use it, no net advantage gained over competitor. If you develop the expertise in house (likely the harder thing) then you have an advantage over your competitor. Of course this has to be balanced with what will be your competitive advantage and what will not
- Harder to manipulate: You cannot fire 1 of your SaaS and tell the other 2 to do the work
> Median salary in the US is about $50K
The median company isn't necessarily spending $10k per employee for software.
FOSS as much as possible.
There's plenty of situations in business where using it is an incredibly good idea. There's even more situations where you're better off just paying for a service.
OSS is all about leveraging "hidden" advantages agains competitors that have clear and obvious financial advantages over you. If you get it right, you win!
Of course, if you don't like risks and don't like "uncomputable" prices, or "prices unique to each buyer", then sure, be conservative, and stay away from FOSS.
2. You can still be locked into a single-supplier when you pay for third-party FOSS support. In fact, most third-party FOSS support comes from a single supplier.
3. FOSS that doesn't have a sustainable business model attached to it rarely serves the needs of enterprises. There's FOSS alternatives to Sharepoint, but what's your FOSS alternative to Tableau? Salesforce? Slack? Will you actually save money by using it, compared to just paying a vendor?
From a purely technical POV, I'm pretty sure that feasible alternatives exist to all of these, e.g. I don't think Tableau's data viz product does anything that couldn't also be done with relative ease in R. Of course, these commercial offerings extend way beyond the purely technical domain where FLOSS makes the most sense; but that has little to do with "sustainable business models" - R itself is plenty sustainable on its own - and a lot to do with extremely niche or obscure "needs of enterprises" that FLOSS projects are either not clearly aware of, or not very interested in supplying. Niche and obscure problem domains have always been problematic for the open source model, this is nothing new.
It's zingers like this that keep me coming back to threads like this one! "No wireless. Less space than a nomad. Lame."
I use FOSS when it makes sense but 90% of the time the answer has been, 'just use what AWS has.'
Some will translate to increased revenue, a few times over, (which incentivizes the vendor to increase the price accordingly) and some will be net negative.
It's a lowest common denominator product. Which is fine. I use it for anything I need to share on and Trello for organizing, "in my own head."
I won't even look at sharepoint.
How much does it cost you for Jetbrains? How many technical books is that? Is in worth that many books a year for a decent tool?
Is the expectation that your employees cost > $200k or is that not qualified?
In some companies / countries you spend $10k per employee.
all of these three are included in the gross in france
Remember, many people in USA believe that corporation has duty to increase shareholder value. And similar stupid ideas.
No more stupid than the idea that companies are supposed to exist solely for the benefit of the employee. Shareholders are the ones that put the money up to start and grow the company in the first place, so yes, there is an obligation to shareholder value.
Don't like that? Then you are free to start a company that doesn't take investment.
There's however no law that holds a figurative gun to the heads of corporation that their duty is to increase the value of those shares.
And on the productivity point, that makes a good theoretical case but it is just not demonstrated by historical data. In the US, in the past 50 years, it even has a name (the pay-productivity gap or the wage gap). You can look at productivity vs wages since 1970 and see how they have not correlated. Further, you can go into income and wealth inquality growth over the same time (https://en.wikipedia.org/wiki/Income_inequality_in_the_Unite...) and see how the wealth generated by the productivity gains has been highly concentrated in the top 0.1% and 0.01% wealthiest. Some people will talk about real or nominal wages (adjustments with something called the Implicit Price Deflator) that show wages purchasing power increasing, but I think one can look at costs of home, college, and medical care and other critical things in social mobility that have increased in cost far exceeding inflation as complications to that idea.
Fiduciary duty means that the board is supposed to be honest with the shareholders and not actively work against the corporation. That does not mean, in fact, that they are required to put growth of shareholder value to any respect.
> Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668 (Mich. 1919) is a case in which the Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than in a charitable manner for the benefit of his employees or customers. It is often cited as affirming the principle of "shareholder primacy" in corporate America. At the same time, the case affirmed the business judgment rule, leaving Ford an extremely wide latitude about how to run the company.
> In the 1950s and 1960s, states rejected Dodge repeatedly, in cases including AP Smith Manufacturing Co v. Barlow or Shlensky v. Wrigley. The general legal position today is that the business judgment that directors may exercise is expansive. Management decisions will not be challenged where one can point to any rational link to benefiting the corporation as a whole.
The caveat is important. If a company says, "Customers don't like it when rich people in suits treat <x> like shit. Therefore, if we spend a small amount of money treating <x> better, this will make our customers happy, and they will buy more of our products, recouping the cost and bringing in more profit for our shareholders." Substitute the environment, animals, customers, employees, people in Africa, cancer patients, the children, etc. It doesn't matter if you're completely full of shit, you just have to make the argument.
So while you're correct that companies have a primary requirement to increase profits for their shareholders, in practice, this requirement is incredibly loose, to the point of not actually being a requirement at all.
But that's beyond my knowledge on this matter :)
It always seemed to me the value an employee brings is the upper bound on pay (demand drops near 0 over that), but the pay is determined by supply and demand for that labor.
Yes, pretty much so.
> lowering pay?
Nope. Reality is way more complex than that.
"The fully-loaded costs of employees are much higher than their salary: exactly how much higher depends on your locality’s laws, your benefits package, and a bunch of other HR administrivia, but a reasonable guesstimate is between 150% and 200% of their salary." -https://www.kalzumeus.com/2012/01/23/salary-negotiation/
I'd hypothesis that most employees on whom companies spend $10k for cloud software are making $100k+.
But even so, the average salary in the US is < $60k. Use whatever multiplier you want, $200k is way high.
Companies are spending far less than $200k/employee all-in.
So to slightly rephrase the OP's question:
> Do people really believe that $100k is a normal salary?
But it's pretty obvious that a basic "customer support" combo like Office 365 + Okta + Zendesk + Intercom + Slack + Zenefits starts to add up to a meaningful percentage of the employee's take-home compensation. (Remember these are positions where $20/hr is a good rate.) And remember, the comparison figure for managers over 50 is roughly $0, which approximates the spend on these functions as far back ago as 2008.