SaaS: Software as a Sponge
Dan Farber kicked off the discussion yesterday around salesforce's new Unlimited Edition. Phil Wainewright weighs on with his view emerging SaaS pricing does not add up. It is a slippery slope.
Understand that Benioff and gang want to emulate software margins that Adobe and Microsoft have. The reality is buyers have learned over the years from negotiating with the masters - CA, Oracle - etc. There are checks and balances in the market as I wrote in Killing the Golden Goose?.
As a result software discounts now mirror software gross margins - 70%+. And soon salesforce.com's price book will be as thick as SAP's. And maybe Oracle will look attractive as it rolls out its own "all you can eat" pricing.
SaaS vendors have a small window of opportunity to redefine software. Not just end of software - end of traditional software games.
Update: Charles Zedlewski (on his personal blog, he works for SAP) adds his POV here
Vinnie,
I am pleased to see Phil take the SaaS vendors to task, he had seemed a bit too evangelistic toward SaaS of late.
As you know, SaaS is really just another delivery model. An important an efficient one, certainly, but for many SaaS companies, particularly salesforce as a publicly traded firm, it is pure mythology to think they arent after the same things SAP and friends are, high margin, recurring revenue streams.
Posted by: Jason Wood | March 07, 2006 at 05:51 PM
I'm not 100% convinced with Phil's argument. Sure, SF.com wants to make a killing but it's a short sighted argument. The long play is surely to price to achieve a given net return based on projected volumes. Having said that, I wonder how oong it will be before some of the add-ons simply get bundled in. And does anyone *really* need all 60 bits and pieces?
Needless to say, it's good to see someone putting SaaS on notice.
Posted by: Dennis Howlett | March 07, 2006 at 09:01 PM
and no one is talking about implementation, testing, training and other costs which do not magically go away with SaaS
Posted by: vinnie mirchandani | March 07, 2006 at 11:52 PM
In which case - over to you my friend
Posted by: Dennis Howlett | March 08, 2006 at 11:31 PM
In view of the differences of opinions about the perceived SaaS advantages, my post lists some items that are not so commonly perceived to be associated with SaaS. See http://nitnblogs.blogspot.com/2006/03/to-saas-or-not-to-saas.html
Posted by: Nitin Goyal | March 09, 2006 at 11:31 PM