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SaaS prices going up?

by Dennis Howlett on June 24, 2009

FOWA Tour- Roan Lavery

The last couple of weeks I’ve been hearing a familiar sound: how do saas/on-demand businesses find a good business model? Each place I go I have heard the same question or a close approximation. This is important if you’re thinking about vendor viability. Earlier this week Lucid Era, a business intelligence folded. BI is a promising area for innovation that would be useful for many professionals so it is sad to see this company go to the wall. It’s also rare as companies usually get acquired. But then I’ve also seen indications that prices are rising. Check the presentation at the top of this post. Look especially for Slide 20 which shows how Basecamp has gone from freemium to freemium if you can find it.

As an aside, while I am a passionate believer in value for money I am absolutely against ‘free’ as in forever, being a viable business model. Back to the plot. Earlier today, I was chewing the fat with Jason Lemkin, CEO of EchoSign. The company has released version 5 of its document signing software. The service is getting to the point where you could almost believe it is paper. I hope the dopes at my bank are listening. I could say the same about a few lawyers I know as well.

Jason said that he has been able to put his prices up substantially over the last couple of years That’s because he is able to meet the needs of very specific types of business and still beat traditional forms of communication delivery. BT is a fan with some 5,000 users and look how much they like it? They’re reselling it as well. Jason was of the opinion that Twitter could still monetize its model. That could well mean Twitter users having to pay something for the service. I disagree but hey – no-one knows for sure. The Basecamp example indicates that it is possible to achieve higher prices than people might think. NetSuite has certainly benefited. Its seen its revenues climb as it is has signed larger deal values.

The point is this needs to be another saas check point. Ensure that you do a thorough reality check on the company to which you are entrusting your data. If you don’t know how or are unsure, then call me up or email.

Hat tip to Emily Coltman for pointing to the Slideshare

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Tagged as: Basecamp, Business intelligence, business models, SAAS, Twitter

  • One interesting data point on free & freemium ... about the only public (or other) company I know of that actually publishes the customer value of a free customer is eFax (J2 Global is their corporate name). Their 10,000,000 free customers all-in generate $0.05 in revenue per month. Their 1,000,000 paid customers generate $14.85 per month ... I think freemium can be a good way to help get attention for a start-up (though it's harder these days) but I think ultimately once companies hit at least a Basecamp-type stage, they at least have to deemphasize free given these types of numbers as the free base probably competes with the paid base and drags down your revenues ...
  • No worries Dennis.

    It's an interesting point you make about Echosign. I was handed an Echosign document recently for a software agreement and I was amazed just how easy it was to use. No downloads, no printing as a .pdf, just a couple of easy clicks and there you go.

    I'd love to use it for letters of engagement and for contracts.

    M
  • "I’d love to use it for letters of engagement and for contracts." - that's exactly what I was thinking. $15/month if you HAVE to pay? Seems a tiny price to pay for convenience etc, especially with your new business.
  • Agreed 100%. Time to sign up methinks.

    M
  • Dear Dennis,
    I especially like the part that says if (reader) do(es) not like have the ability to do a "reality check" on the company holding their data (intellectual property, in many cases, or proprietary business knowledge) should call or email you.
    I also think that efax (division of J2 Global Communications) has a long way to go in offering even a free service, in that the free in their service is largely incompatible or unavailable to the user who does not pay, despite promotions which promote the expectations of new sign ups who believe they are actually going to simply see a faxed document in their email inbox (not an unreadable attachment) after they've signed up.
    I'm not sure about the others, but efax does not have my support at this time. I wasted my time today signing up for a promotion which did not clearly, outside of fine print in the TOS, relate that I wouldn't be able to view my fax unless I paid.
    However, I will say that gotfreefax.com is an excellent site. I also believe it's worth asking you if salesforce is in the market to acquire anyone public, and if so, if that migh increase shareholder stakes, in your opinion?
    Best,
    Jesse (ps, Google needs to listen...I hope...)
    http://twitter.com/jesatiu
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