Dual-licensing with a "free" tier for non-commercial use and a paid tier for corporate users could solve this. In fact in the future, I believe many companies will do this with software and not just SAAS behind a cloud where this model is dominating today.
One big problem with that is the dichotomy between "cloud" and "open source" - people will pay for SaaS but they absolutely balk at paying for licenses.
I disagreed with you in a previous thread, but I have another point to make.
I think the SaaS model applied to desktop software would run into some problems. I think people would react with hostility if their desktop software stopped working once they stopped paying a license fee, even though they may very well accept this model for browser-based apps.
I think the sparrow guys charged too little for their email client, personally. People will pay for beautiful and quality, productivity tools.
Those SaaS companies are probably not paying for the free software they're using though. Internal costs (people wrangling free/open source/homegrown software) have just become external costs (credit card charges of SaaS businesses doing the same).
The more things change, the more they stay the same. I suppose if folks are getting to capture more dollars for the value they deliver, that's always a good thing. Better to own your own biz versus being a cog in someone else's machine (IMHO).
Let me add some more fuel to the debate - How can software-as-a-service be regulated in a way that it balances consumer rights and the rights of a business? Perhaps:
1. Every SaaS business should be compelled to offer both a subscription price and perpetual license at a fixed price.
2. The fixed price of a perpetual license should not be more than 10x or 20x (?) of the monthly subscription price.
3. If a user has opted for subscription payment, they should get a perpetual licence after they have paid a certain subscription amount over a period that is not more than 2x or 3x of the fixed price of the perpetual license.
4. SaaS businesses should not be allowed to hold users data hostage if the user decides to end the subscription. (This can be tricky if the data is in some proprietary format).
5. As much as possible, the SaaS should be able to run offline on a user's computer without needing to offload computing to servers.
Ofcourse, most of the above are practical only for software that you can actually run on your computer and don't require massive computing powers from data centers that some services may need. But then again, that's exactly the kind of software that don't need to be SaaS at all in the first place, as the article too points out.
(Tbh, if you're talking about Google Docs, it's not even that cumbersome. Still, I prefer Office 365 and would probably plump to spend my own cash on that. This is not the point of what I was going to post though.)
I think what you say is totally valid but an additional observation is that once a SaaS gains some traction, or perhaps because they need the cashflow, sometimes the free tier can disappear or be significantly reduced.
The canonical example here for me is UserVoice: it used to have a free tier, no longer does and, in fact, whilst I was writing this post I was searching for current pricing... but it turns out they're not even transparently priced any more (please feel free to correct me if I missed something).
This is definitely a real concern with the SaaS model and one of the reasons big business has been reluctant to rely on it.
Source code escrow works really well to sell enterprise customers. Perhaps there should be something similar for SaaS companies. An agreement, paid for by the customer, that if the company fails or the service is no longer supported, the customer will be given the ability run it themselves.
Good article. I still think a free tier can be beneficial for most SaaS products. At Eventbrite we shared space with Yammer and Zendesk, the three of us with free tiers (Zendesk $20/year "donation") and really making it work. The point is NOT to implement limits but instead to implement features that make sense for those able to pay. For many SaaS services, that's admin tools to manage users. The reality is that there are millions of companies out there with fixed costs well less than $20k per month (don't forget there are non-tech startup companies, too).
It cannot be overstated that it really is very easy to raise prices. It's pretty much impossible to make a pricing mistake in the beginning because for growing companies, the initial users will only amount to a fraction of total users over time.
And there are other barriers (I actually think the bandwidth problem is solvable, by caching large parts of the program). Before SaaS, a poor kid from Egypt could (although it's illegal) get a pirated copy of Photoshop, Office or Visual Studio and improve their skills with modest means. Now they need software subscriptions that they can't afford.
I can see two things happening: it increases the popularity of FLOSS software in such countries and/or companies will adjust the monthly subscription fee to be proportional to e.g. the median income.
Anyway, I think thinks can be said for both models. Regardless my worries about SaaS, I also like always having the latest version, not having to install and maintain programs, etc.
If you sell your software as SaaS, you need to make sure it is something that your customers use every day. This is a problem when you sell to consumers, because often they will need your software only a few times a year.
I sell a product named MDB Viewer on the Mac App Store, and judging from support emails many of my customers need it just to convert a single database; but they are happy to pay, and they like that they own a license. There's no way I could sell this as a SaaS product.
Unfortunately most SaaS companies today have got on a bandwagon of offering “enterprise” versions of their products which alienate those which brought them bottom up into a corporation in the first place.
You can see it in the “pricing” page that goes exponential on the “enterprise” offer and requires calling a sales organization that takes days or weeks to respond (vs filling in a form and providing credit card details). Usually it looks something like this;
- Free: $0 but limited
- Private: $5 / month for some extra features but limited collaboration
- Professional: $49 / month / user ... includes collaboration up to N users
- Enterprise: insane pricing that needs board level approval and will cost your company $millions / year
Free to Professional level I can kind of understand but in terms of scaling, the Enterprise is dumb. If you make me - a developer / designer / PM / etc have to kick off board level meetings to pay for this product, you already lost.
SaaS companies need to keep their pricing scalable so that as their product goes “viral” in an enterprise, people with purchasing control up to $10000 / year in departments and groups across the corporation can keep paying by credit card without needing to get additional approval. Stop making work for your supporters
Traditional enterprise software suffers from this problem. SaaS doesn't really. Having to deal with different versions of a codebase for different customers was hellish and I don't want to do it again.
I used to feel very differently about this as a consumer, but when you see things from the other side as an ISV, it's obvious that a one-time fee isn't a sustainable business model - if you want the software to remain available, you need to pay for the duration.
A SaaS model works well for both sides, I think - consumers always have the latest version and their data is highly available and safe against local events (storage failure, fire, flood etc); the business has (relatively) reliay income stream.
I think this makes a ton of sense for corporate customers and specialized, expensive software packages, but the model has trickled down to weather apps and text editors. Software that didn't/wouldn't cost more than ~$50 in an "up front purchase" model, but now requires an ongoing subscription to keep using. Many apps using a SaaS business model also don't like to let you manage your own data and insist or at least nudge you towards storing data in their cloud - which locks you in a lot more.
The funny thing is this actually could be a good idea. Big companies do source code escrow as part of on premise software purchases. A SaaS equivalent which handled data portability, ongoing legal/compliance, etc, as a 10% surcharge on invoices or something, could solve this for SaaS, making purchases happen when they might not now.
The real reason for the software as a service model is that it makes it easier to extract/capture value. Many SaaS offerings would be better at providing value to customers with non-SaaS architectures, unfortunately providing value to customers is second to providing value to shareholders.
Don't pay for SaaS, don't encourage this bullshit. If foss offerings don't cover your usecase piracy is better for humanity than paying.
Licensing isn't perfect. On the contrary, it is the least worst implementation of attempting to extract a reasonable amount of revenue from the user of your software, who is realizing value creation or benefit themselves from its use. SaaS is popular because the exchange of value between producer and consumer (and the ownership and responsibility model) is much more clear (imho). Open source tooling might be a better fit based on your org's needs and your use case.
Solving for the intersection of building and maintaining tools people desire and those building said tools eating and paying rent is hard.
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