[HN Gopher] Ask HN: Why haven't we seen a race to the bottom in ...
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Ask HN: Why haven't we seen a race to the bottom in SaaS pricing?
A lot of SaaS products are making money hand over fist yet they
seem easily replicable. Furthermore, most SaaS companies don't seem
to have network effects or any particularly large switching costs.
Given these dynamics, why haven't we seen a race to rock bottom
SaaS prices in and around $1 like we did with games and paid apps?
Author : majani
Score : 13 points
Date : 2023-12-10 21:31 UTC (1 hours ago)
| codegeek wrote:
| "seem easily replicable."
|
| Replicate what? The code ? May be. The entire business? Not that
| easy. Running a saas is lot more then writing code.
| tobinfekkes wrote:
| Have you ever tried switching project management apps?
| thesuperbigfrog wrote:
| "they seem easily replicable"
|
| It is all about the upfront costs and maintenance.
|
| It takes some serious capital and talent to build a high-
| availablility data center that SaaS run on.
|
| The software is just icing on the cake. You did not include the
| cake, the plate the cake is on, the table the plate is on, the
| chair at the table, and the roof overhead. All of those other
| components are needed and they have costs which must be paid for
| everything else to work so well and be so easy to use.
| tredre3 wrote:
| > It takes some serious capital and talent to build a high-
| availablility data center that SaaS run on.
|
| Come on, it's clear OP meant SaaS in general, not Amazon that
| also does SaaS as a value-add to its cloud infrastructure.
|
| No SaaS provider is building their own datacenter. They usually
| don't even run their own servers...
| thesuperbigfrog wrote:
| >> No SaaS provider is building their own datacenter. They
| usually don't even run their own servers...
|
| True, but SaaS still runs on cloud infrastructure so the
| costs are still there: you are either Amazon, Microsoft, etc.
| and build the infrastructure yourself or you pay them to rent
| time/space from them.
|
| The base costs for the infrastructure do not go away which
| makes it unlikely for SaaS costs to race to the bottom.
| rossdavidh wrote:
| "SaaS" is a pretty wide label. Can you be more specific? Are we
| talking about, say, PeopleSoft and SAP and that sort of thing? Or
| some other category?
| simonw wrote:
| When I'm shopping for a SaaS product one of the most important
| factors for me is trust.
|
| Can I trust the product I'm using to stick around, to be secure,
| to not jack up prices?
|
| If the product is clearly a clone of an existing product I'm much
| less likely to trust it - my very first introduction to them was
| through an action that doesn't inspire me to trust them!
| kortilla wrote:
| Why would cloning something be untrustworthy?
| pnathan wrote:
| High switching costs internally in terms of tooling and
| processes.
|
| Also businesses recognize, broadly, that when vendors offer
| something for nothing, the value is commensurate with the price.
| badrabbit wrote:
| "Everything is worth what people are willing to pay for it"
|
| Unless you're in a communist country and all.
| jacobsimon wrote:
| Curious what other people think but I'd bet it has more to do
| with the prices that the market will bear rather than competition
| between products, and there's a huge difference between consumer
| and business prices generally for this reason. This is reflected
| in consumer vs business SaaS tools, e.g. compare pricing of
| Apple's iCloud vs Box pricing. Another factor is that for many
| services, there isn't a clear marketplace as there is for
| consumer apps, and SaaS tools often grow via outbound sales, so
| the market is less efficient essentially.
| monero-xmr wrote:
| Go try and replicate one. Get the team and the capital, build all
| the features, get all the certificates, get an enterprise sales
| team, and do all of this to... build a clone of an existing
| product? And what's to stop them from cutting their prices until
| you bleed to death?
|
| Best way to do this is a pure commodity play. Like something
| totally replaceable where the cheapest possible option that works
| is good. I've seen many Indian and Eastern European teams try
| this. Just google "[Some SaaS] vs" and see the products pop up.
| It's possible but it isn't as easy as it sounds.
| 0x073 wrote:
| SaaS is like a subscription for a multiplayer game. Did Xbox gold
| dropped or world of warcraft monthly price? Afaik no.
| pirsquare wrote:
| Because business owners don't have the time and resources to keep
| changing vendors to save 10% costs. Time is money.
|
| Switching cost is more than you think. For example, I don't like
| Zendesk it's expensive and over-engineered. But I stick to it
| because I know how hard it is to port my docs over and re-setup
| the live chat. It's half a day work. To save $50/mo, it's not
| worth my time. My focus is growing my company, not to save
| $50/mo.
|
| I run SaaS and spent alot in SaaS products.
| adocomplete wrote:
| I question the "making money hand over fist" notion. Aren't the
| vast majority of SaaS companies burning VC money to stay afloat?
|
| Like others have also said, trust plays a key role. Companies
| usually like to stick with a tool that already works and where
| they know what they're going to get vs taking a risk on a copy-
| cat to save a few bucks.
| toasterlovin wrote:
| The main thing SaaS companies do is navigate the politics of
| selling into businesses. The software is an implementation
| detail. So you can replicate the product, but you still have to
| do the (much harder) work of selling.
| b2bsaas00 wrote:
| Marketing cost increase with competition. Usually a SaaS starts
| at loss, then when competition increase it make loss because
| higher cost per acquisition.
| otterley wrote:
| > yet they seem easily replicable
|
| At a former job, we had a rule that if someone claimed something
| was easy or trivial or the like, they were assigned to accomplish
| it.
| pembrook wrote:
| Because most Saas products are _much_ harder to replicate than
| you think, and they mostly target B2B customers.
|
| If you're running a business with employees, the difference
| between $1/month and $100/month for a piece of software is a
| rounding error. Even if you buy 100 of these apps, it's still
| cheaper than the all-in cost of a single employee (who, in many
| countries, you cannot even fire).
|
| Conversely, you could ask the same thing about anything. For
| example:
|
| _A lot of [employees] are making money hand over fist yet they
| seem easily replicable. Furthermore most [employees] don't have
| network effects or large switching costs. Given these dynamics,
| why haven't we seen a race to rock bottom in [employee] prices?_
|
| Either the market is persistently inefficient for some reason
| (usually isn't the case) or there's something you're not
| accounting for or don't understand in your first principles
| assumptions.
| folmar wrote:
| We've seen some in shared web hosting for example. Where switch
| is easy costs go down.
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