Comments on: More about pricing: open source and commodity services

By: Hyperdisruption, Cloud Computing, and the Invisible Hand of Economics | Ubikwiti - Blog

Sat, 02 May 2009 12:27:23 +0000

[...] Howlett recently noted a price-cutting trend In the SaaS world in his AccMan post “More about pricing: open source and commodity services”. � � � [...]

By: Tim Loving

Tim Loving — Fri, 01 May 2009 09:13:21 +0000

Dennis is correct that the two most critical factors affecting pricing are increasing competition enabled by SaaS technologies and the ability of SaaS vendors to be inventive with their pricing policies.

The global economy IS in the toilet. It will remain there for the foreseeable future.

Pricing will continue to decrease, new vendors will come onto the market, and some current vendors will go out of business. Pricing is and will continue to be a VERY important factor for customers.

But there are a bunch of other metrics that are also important to customers, such as scope and quality of content, flexibility to adjust to changing business conditions, and, not least, vendor survivability in a much tougher, more demanding environment.

The underlying dynamics of the free enterprise system haven’t changed – the speed and scope of market changes are visibly accelerating because of the conjunction of a major step-change in technological capabilities with the deepest and most widespread recession since the Great Depression.

In such a yeasty fermenting brew customers need to understand the risks of being locked into vendor-proprietary environments. Open source and open standards and commodity services will become increasingly important as gritty competition starts grinding away at vendor margins.

By: Sugar CRM reduces prices across the board, looking for broad adoption | Irregular Enterprise | ZDNet.com

Wed, 29 Apr 2009 15:59:27 +0000

[...] As I said on my personal weblog yesterday: A day rarely passes that I don’t see another pricing adjustment in the saas world. [...]

By: Dennis Howlett

Dennis Howlett — Wed, 29 Apr 2009 06:49:36 +0000

@bob – there’s a lot of truth in that first statement.

Studies have shown that contextual advertising in business applications doesn’t work.

By: Bob Harper

Bob Harper — Wed, 29 Apr 2009 06:40:16 +0000

It’s my take that the new providers are using old pricing with a little twist of no upfront and monthly fees. If you’re a small business paying for different systems £15 a month here and £15 a month there adds up so I see much smaller fees for systems that only do one thing. So, if I did a SaaS bookkeeping system I’d be looking at £5 a month.

There is also the option of using the Google model and allowing paid sponsorship to appear in the system and allowing the end user to pay less! If a financial system did this by linking into “best deal” suppliers then the system could pay for itself.

By: Dennis Howlett

Dennis Howlett — Wed, 29 Apr 2009 02:05:15 +0000

I read that piece a little while ago but there is no internal logic to the argument that leads to the 90% conclusion. In any event there is nothing unusual about death rates of this magnitude as it relates to tech innovators. How that ties to price is a mystery to me.

One of my ‘golden oldie’ questions in evaluations is about vendor viability. For that one in the context of open source – see what I say tomorrow on ZDNet.

Also recognize that as many of the vendors are tiny, they can manage their cost profiles far more easily than the majors which have structural issues.

Finally, if you look at the history of computing you can see that many of the world leaders we see today were born out of recession – Microsoft and Apple being the two standout examples. Who’s to say it will be any different this time around? If anything, the conditions are forcing emergent vendors to move over to OSS as a way of containing dev costs.