We just told 2 big vendors where to go as a result of not just 20% rises, but one was an eye gouging 600%.
We spent 2 manic weeks scrambling to implement alternatives but we have now done so and in the process saved ourselves several hundred thousand bucks and got arguably better systems as a result.
They did this to me and I was shocked and disappointed, especially since their entire business model is to become the plumbing between your different systems. Seems predatory.
It would be interesting to see what the corresponding figures are like for on-prem, although they would be much more difficult to calculate and would vary wildly between companies.
The only thing that really stood out to me was the Google storage price increase, which seems rather large, as in way out of line in comparison to our 2023 spend and 2024 budgeting.
It would also be nice to see what exactly is meant by SaaS vs presumably IaaS. I.e. would Amazon Glacier (random selection since we've been comparing the pricing with tape recently) fall under their definition of SaaS.
Storage prices depend on the reliability you want.
Someone like Google cannot ever lose data of any customer. So if you pay for 1GB of storage, they probably actually store 5GB of data or more for you. It will be redundantly stored within the datacenter across different racks, but also stored (also redundantly) in different datacenters in case of flood/fire. Theres probably a copy on tape incase of a catastrophic software bug that wipes all the drives. Or two copies on tape because if there were a software bug that wiped all the drives, the chances that every single tape was readable for a restore is low - so more redundancy needed.
However, if you go for a smaller player, they probably still keep multiple copies of your data, but it might be a RAID-5 -like setup, requiring only 1.3GB of storage for each GB you store with them. It can survive a drive failure, but two drive failures or a datacenter fire or an engineer fat-fingering an erase-all command and your data is all gone.
Thats (part of) why the big players charge so much for storage. I actually wish I could choose less reliable yet far cheaper storage option with a big player, but they don't want to offer that because of the PR hit when they do lose customer data.
I did a detailed price cost calculation of onprem vs AWS as I worked at a MSP. Our cost of compute and storage including DC construction over 10y was about half the cost of AWS.
We also used cheap supermicro and had no service contracts or warranties we had on site staff. Their salaries were included.
> It would be interesting to see what the corresponding figures are like for on-prem […]
You won't find any, not easily anyway. The world of enterprise SaaS follows a different business model that I refer to as «hiding the dead horse in the cloud» and holding the customer to ransom.
The premise: the customer is already locked into the wares the vendor supplies, and the customer can't easily migrate away from the product. Oftentimes, the product is also ridden with the technical debt, but it either has a feature critical to the business or there are multiple business (and technical) processes that have a deeply ingrained reliance on the product. It is either the data or the integration with the product. Regularly both.
The vendor repackages the product («the dead horse») as a SaaS, rolls it out into the cloud (the act of hiding the said dead horse), bumps prices up and slips the bill under the customer's front door (the ransom). Cloud costs are passed onto the customer at a markup. The product (and sometimes the customer) might get minor tangible benefits from the repackaged version, e.g. improved availability and reliability, although even that is not always the case. SaaS products typically do not use native cloud services, they run on EC2 instances (or their equivalent in Azure, less often GCP) and are cobbled together just enough to make them not fall apart.
SaaS, as a business model, is not about the engineering excellence most of the time. It is about squeezing the last drop of blood that there is left in a legacy product, now being offered as a shiny-shiny SaaS version («hey, lookie, we are also int the cloud!»). This is the reality.
The theory is somewhat different. In between 2000s and 2020 (approximately), vendors used to tailor their products to specific needs of each specific customer which increasingly became difficult to maintain, update and upgrade as there would be no single product titled «ABC», there would a «ABC customised/hand-rolled for customer 123», «ABC customised/hand-rolled for customer 456» and so forth. So the original premise of SaaS was to have a single version of the product for ALL customers that exposes simple data centric and whatever other technical interfaces that the customer would hook into. The enterprise world does not work that way, though.
There are positive exceptions in the world of SaaS, and almost all of them are in the startup universe and outside the enterprise.
GCS launched as an S3 competitor (with an S3 compatible API). So their pricing was basically copy pasted from S3.
From the start though they offered more expensive to run features (a consistent list api, 1GBit transfer per file vs 100mbit for S3 at the time, Glacier-like storage with instant retrieval).
I think this pricing jump is mostly pricing it at what it always should have been. Plus a bit of the now being so focused on enterprises that the list price means less and its all about "call sales for more information".
S3 has built most of those features since then though, without a price increase.
I propose a new term "TDaaS": Tech Debt as a Service.
(Feel free to modify the name to something less clunky.)
A SaaS can provide a useful tradeoff. Just don't get scared by FUD marketing tactics, like "Why you shouldn't build your own X" etc. It's a tradeoff: you introduce an external dependency and give up control.
> It's a tradeoff: you introduce an external dependency and give up control.
I think this is why self-hostable solutions are becoming more common.
When a solution is self-hostable, both sides win.
The SaaS provider can operate the solution, which offers revenue. Customers like it because they can get going quickly.
Or the customer can host it. This allows them to control where the data goes and minimize costs. I like the way this tweet puts it "The real reason to buy SAAS is for someone else to do the ops work"[0].
In both cases the customer benefits from the continued development of the software (similar to how a library improving benefits all applications which depend on the library).
And the ability to self-host removes a business risk. If the SaaS vendor fails, well, we have to support it ourselves. If it is OSS or we have the code in escrow, all the better.
> Price should be the maximum the market can afford while still beating ones competition.
This is such a frustrating perspective. I have so much respect for people who build projects and companies with a profit margin that lets them earn a comfortable living, without trying to extract as much as they possibly can from everyone around them.
If they had given you a seat that gives you power, money and influence, and you had the knowledge to expand it both for yourself and them, what would you do?
Nothing? Well that seat would vanish pretty quickly.
This is complete nonsense, right? SaaS prices have nothing to do with input costs --- prices are plucked out the air (or from somewhere else...) based on some guess about what the market might bear vs aspirations for volume. Then, once the smoke clears, you jack the price up a bit in order to buy a new boat.
As TFA says, these companies know that their "all in one" cloud offerings are sticky. My employer just spent the last few years going all in on Microsoft's cloud. We use it for email, productivity suite, Teams, storage.
This was after several years of using Google's tools (though not with the same level of commitment -- we still used Office, and had Exchange and AD on premises). Google jacked their prices for Workplace so that was the motivation to move to Microsoft. I fully expect Microsoft to do the same, in another year or two, but this time around I don't think we'll change -- this time we're too invested, it would be too big a project and have too many ancillary costs.
If we had been more "all in" on Google, we probably would have just paid the increase.
It seems a little dangerous. Maybe many companies will be like - you know we panic bought all these online things during COVID and do we really use them all that much?
Long term rug pull on CTOs who thought the cloud would somehow be better, easier & cheaper.
CTOs get lots of free credits, downsize their infra staffing.
Start using the basic building blocks, but then of the basic building blocks (servers & storage) are marked up and expensive.
Next, to find cost savings their org need to move deeper and deeper into alphabet soup of cloud vendor proprietary stack, at which point they are locked in.
They’re even more locked into cloud now than it seems because not only have they shut down their in house ops but they’ve lost the skills and the work force.
Now SaaS and cloud is free to squeeze as hard as they want. The lock in is strong.
Saw this coming miles away. Nobody listened of course. This industry worships fads. When the buzz becomes “everyone is doing X” it becomes truly hard not to do it too. All your bosses, employees, investors, etc push for it.
Companies are going through the "reduce our cloud bill NOW" exercise. They have to cut the unnecessary, wasteful infrastructure and raise prices.
So, after all these years of hearing "who cares about performance and cost - just buy more engineers, CPU, and memory", gravity is once again being the bitch that it is.
I can relate with that. I was working in a company that after some layoffs and other cost reduction measures the COO (ex-Amazon) came and gave the instruction to reduce the maximum amount of costs in infrastructure (in our case GCP) and after 3 months we saved more than USD 15 million. Most of the things were GCS and Big Query (some situations where people were doing USD 5K querys).
Turns out building massive workforces on top of software business that don't require them isn't good business.
The big mistake most companies made is that they applied the old-school "Fortune 500" way of company building to software businesses (i.e., bigger is better). Humorous, because the promise of software was that it reduced the need for that behavior.
The end result is that they've built companies which ironically have great margins (or at least, should), but they burn cash like they're still in their seed round. Even worse, this behavior pushes out most of the early talent which means you need ever-more people to fill in the skill gap created by hiring lower quality talent. This also creates the problem of a once-great product deteriorating into mediocrity over time which also threatens grip on market share.
As a co-founder of a SaaS company, I look at my (much much) larger competitors as a competitive advantage rather than a disadvantage. Most of our competitors in our space have much higher pricing because they have 1000+ person headcounts to maintain. We will certainly make less money than our competitors but the general idea is there is a sweet spot where we can charge less for our service and still walk away rich because there's less things to burn cash on.
Zero interest rates. You raise big rounds so now you have to spend it. You raised at crazy valuations so now you need massive ARR and have to enshittify and raise prices.
The whole phenomenon of huge SaaS companies with huge prices and huge workforces seems like a zero interest rate phenomenon.
That is definitely the case but also a lot of those saas companies dont even have great margins and were pure zirp. That’s because they also keep building their stack like they’re in seed stage.
> Software price hikes are driven in part by inflation. The cost of living has surged post-pandemic in most economies. Higher electricity costs, chip shortages, and rising wages all increase the cost of doing business.
Not that there hasn't been inflation, but prices have gone up much more in the last year than inflation itself has. Inflation is 3.2%, lower than the 100-year average in the U.S. It was higher a year ago, but still only about 9%. All of the price increases in that article are significantly higher than that, most are multiples of that. Even if they hadn't raised their prices for a few years prior, that still doesn't add up. I don't buy inflation as a valid excuse, though I would it as an invalid excuse they're still using because people perceive it as true.
It’s not caused by general inflation, it’s a response to the attempts to mitigate inflation.
Increased interest rates have meant an end to cheap credit and put a damper on stock prices.
Companies are trying to shore up their valuation by signalling to investors that they are driving towards profitability rather than debt-driven growth. This means raising the price of their product and cutting costs (ie layoffs).
If the published inflation rate is significantly less than the increase in price of a wide variety of goods, then doesn’t that indicate that the inflation rate isn’t being calculated correctly? My understanding is the inflation rate should generally reflect how much more expensive things are getting each year
The profit-price spiral of the greater economy is why. Everyone raises their prices so everyone raises their prices. 60% of inflation in this post-pandemic echo was measured to be due to corporate profiteering, e.g., greed.
SaaS companies are owned by billionaire-investors.
or actually investor-companies. The ones at the top of the world.
Same ones who get the printed dollad on their hands first to spend it before other common folks wake up to the fact that it was printed and starts loosing value
I red somewhere that 80% of dollars were printed (=made up digitally) in the last 3 years. so the inflation is now coming fast, 1$ = 20$.. that's 5x the prices.
And most common things have only gone up 50 to 150%.. more to come
MissTake|2 years ago
We spent 2 manic weeks scrambling to implement alternatives but we have now done so and in the process saved ourselves several hundred thousand bucks and got arguably better systems as a result.
Lean doesn’t have to mean poor.
karmelapple|2 years ago
They did this to me and I was shocked and disappointed, especially since their entire business model is to become the plumbing between your different systems. Seems predatory.
hjhffyuu57|2 years ago
The only thing that really stood out to me was the Google storage price increase, which seems rather large, as in way out of line in comparison to our 2023 spend and 2024 budgeting.
It would also be nice to see what exactly is meant by SaaS vs presumably IaaS. I.e. would Amazon Glacier (random selection since we've been comparing the pricing with tape recently) fall under their definition of SaaS.
londons_explore|2 years ago
Someone like Google cannot ever lose data of any customer. So if you pay for 1GB of storage, they probably actually store 5GB of data or more for you. It will be redundantly stored within the datacenter across different racks, but also stored (also redundantly) in different datacenters in case of flood/fire. Theres probably a copy on tape incase of a catastrophic software bug that wipes all the drives. Or two copies on tape because if there were a software bug that wiped all the drives, the chances that every single tape was readable for a restore is low - so more redundancy needed.
However, if you go for a smaller player, they probably still keep multiple copies of your data, but it might be a RAID-5 -like setup, requiring only 1.3GB of storage for each GB you store with them. It can survive a drive failure, but two drive failures or a datacenter fire or an engineer fat-fingering an erase-all command and your data is all gone.
Thats (part of) why the big players charge so much for storage. I actually wish I could choose less reliable yet far cheaper storage option with a big player, but they don't want to offer that because of the PR hit when they do lose customer data.
mozman|2 years ago
We also used cheap supermicro and had no service contracts or warranties we had on site staff. Their salaries were included.
Small DC 2mw.
inkyoto|2 years ago
You won't find any, not easily anyway. The world of enterprise SaaS follows a different business model that I refer to as «hiding the dead horse in the cloud» and holding the customer to ransom.
The premise: the customer is already locked into the wares the vendor supplies, and the customer can't easily migrate away from the product. Oftentimes, the product is also ridden with the technical debt, but it either has a feature critical to the business or there are multiple business (and technical) processes that have a deeply ingrained reliance on the product. It is either the data or the integration with the product. Regularly both.
The vendor repackages the product («the dead horse») as a SaaS, rolls it out into the cloud (the act of hiding the said dead horse), bumps prices up and slips the bill under the customer's front door (the ransom). Cloud costs are passed onto the customer at a markup. The product (and sometimes the customer) might get minor tangible benefits from the repackaged version, e.g. improved availability and reliability, although even that is not always the case. SaaS products typically do not use native cloud services, they run on EC2 instances (or their equivalent in Azure, less often GCP) and are cobbled together just enough to make them not fall apart.
SaaS, as a business model, is not about the engineering excellence most of the time. It is about squeezing the last drop of blood that there is left in a legacy product, now being offered as a shiny-shiny SaaS version («hey, lookie, we are also int the cloud!»). This is the reality.
The theory is somewhat different. In between 2000s and 2020 (approximately), vendors used to tailor their products to specific needs of each specific customer which increasingly became difficult to maintain, update and upgrade as there would be no single product titled «ABC», there would a «ABC customised/hand-rolled for customer 123», «ABC customised/hand-rolled for customer 456» and so forth. So the original premise of SaaS was to have a single version of the product for ALL customers that exposes simple data centric and whatever other technical interfaces that the customer would hook into. The enterprise world does not work that way, though.
There are positive exceptions in the world of SaaS, and almost all of them are in the startup universe and outside the enterprise.
beebmam|2 years ago
cavisne|2 years ago
From the start though they offered more expensive to run features (a consistent list api, 1GBit transfer per file vs 100mbit for S3 at the time, Glacier-like storage with instant retrieval).
I think this pricing jump is mostly pricing it at what it always should have been. Plus a bit of the now being so focused on enterprises that the list price means less and its all about "call sales for more information".
S3 has built most of those features since then though, without a price increase.
faeriechangling|2 years ago
r_singh|2 years ago
Many (most? Except maybe asana) public SaaS companies have 20% cost of revenue AFAIK
nathanaldensr|2 years ago
dgb23|2 years ago
(Feel free to modify the name to something less clunky.)
A SaaS can provide a useful tradeoff. Just don't get scared by FUD marketing tactics, like "Why you shouldn't build your own X" etc. It's a tradeoff: you introduce an external dependency and give up control.
mooreds|2 years ago
I think this is why self-hostable solutions are becoming more common.
When a solution is self-hostable, both sides win.
The SaaS provider can operate the solution, which offers revenue. Customers like it because they can get going quickly.
Or the customer can host it. This allows them to control where the data goes and minimize costs. I like the way this tweet puts it "The real reason to buy SAAS is for someone else to do the ops work"[0].
In both cases the customer benefits from the continued development of the software (similar to how a library improving benefits all applications which depend on the library).
And the ability to self-host removes a business risk. If the SaaS vendor fails, well, we have to support it ourselves. If it is OSS or we have the code in escrow, all the better.
[0]: https://twitter.com/rickasaurus/status/1700697140492648454
adrr|2 years ago
anotheraccount9|2 years ago
prepend|2 years ago
I think that transition costs are high and they’ll find that some customers will stick with them even with higher prices.
cyanydeez|2 years ago
It's the basic economics of SaaS, endoflife was just too soon.
unknown|2 years ago
[deleted]
throwawaysleep|2 years ago
japhyr|2 years ago
This is such a frustrating perspective. I have so much respect for people who build projects and companies with a profit margin that lets them earn a comfortable living, without trying to extract as much as they possibly can from everyone around them.
rapind|2 years ago
activitypea|2 years ago
darklycan51|2 years ago
itiro|2 years ago
hnaccountme|2 years ago
unknown|2 years ago
[deleted]
Phlarp|2 years ago
paulddraper|2 years ago
A shame companies started being greedy in 2023.
throwitaway156|2 years ago
Nothing? Well that seat would vanish pretty quickly.
knightofmars|2 years ago
dboreham|2 years ago
SoftTalker|2 years ago
This was after several years of using Google's tools (though not with the same level of commitment -- we still used Office, and had Exchange and AD on premises). Google jacked their prices for Workplace so that was the motivation to move to Microsoft. I fully expect Microsoft to do the same, in another year or two, but this time around I don't think we'll change -- this time we're too invested, it would be too big a project and have too many ancillary costs.
If we had been more "all in" on Google, we probably would have just paid the increase.
randomdata|2 years ago
Price always has nothing to do with input costs. That is not unique to SaaS.
coffeebeqn|2 years ago
mym1990|2 years ago
unknown|2 years ago
[deleted]
unknown|2 years ago
[deleted]
steveBK123|2 years ago
CTOs get lots of free credits, downsize their infra staffing.
Start using the basic building blocks, but then of the basic building blocks (servers & storage) are marked up and expensive.
Next, to find cost savings their org need to move deeper and deeper into alphabet soup of cloud vendor proprietary stack, at which point they are locked in.
api|2 years ago
Now SaaS and cloud is free to squeeze as hard as they want. The lock in is strong.
Saw this coming miles away. Nobody listened of course. This industry worships fads. When the buzz becomes “everyone is doing X” it becomes truly hard not to do it too. All your bosses, employees, investors, etc push for it.
You’re not going all cloud? What are you? Old?
farco12|2 years ago
dilyevsky|2 years ago
theropost|2 years ago
lowbloodsugar|2 years ago
oriettaxx|2 years ago
unknown|2 years ago
[deleted]
renegade-otter|2 years ago
So, after all these years of hearing "who cares about performance and cost - just buy more engineers, CPU, and memory", gravity is once again being the bitch that it is.
marktangotango|2 years ago
braza|2 years ago
unknown|2 years ago
[deleted]
rglover|2 years ago
The big mistake most companies made is that they applied the old-school "Fortune 500" way of company building to software businesses (i.e., bigger is better). Humorous, because the promise of software was that it reduced the need for that behavior.
The end result is that they've built companies which ironically have great margins (or at least, should), but they burn cash like they're still in their seed round. Even worse, this behavior pushes out most of the early talent which means you need ever-more people to fill in the skill gap created by hiring lower quality talent. This also creates the problem of a once-great product deteriorating into mediocrity over time which also threatens grip on market share.
_fat_santa|2 years ago
api|2 years ago
The whole phenomenon of huge SaaS companies with huge prices and huge workforces seems like a zero interest rate phenomenon.
dilyevsky|2 years ago
unknown|2 years ago
[deleted]
paulddraper|2 years ago
unknown|2 years ago
[deleted]
karaterobot|2 years ago
Not that there hasn't been inflation, but prices have gone up much more in the last year than inflation itself has. Inflation is 3.2%, lower than the 100-year average in the U.S. It was higher a year ago, but still only about 9%. All of the price increases in that article are significantly higher than that, most are multiples of that. Even if they hadn't raised their prices for a few years prior, that still doesn't add up. I don't buy inflation as a valid excuse, though I would it as an invalid excuse they're still using because people perceive it as true.
DoughnutHole|2 years ago
Increased interest rates have meant an end to cheap credit and put a damper on stock prices.
Companies are trying to shore up their valuation by signalling to investors that they are driving towards profitability rather than debt-driven growth. This means raising the price of their product and cutting costs (ie layoffs).
zakary|2 years ago
unknown|2 years ago
[deleted]
sacnoradhq|2 years ago
unknown|2 years ago
[deleted]
pcurve|2 years ago
unknown|2 years ago
[deleted]
jbs8877|2 years ago
unknown|2 years ago
[deleted]
tamimio|2 years ago
unknown|2 years ago
[deleted]
anonymous344|2 years ago
I red somewhere that 80% of dollars were printed (=made up digitally) in the last 3 years. so the inflation is now coming fast, 1$ = 20$.. that's 5x the prices. And most common things have only gone up 50 to 150%.. more to come
alpaca128|2 years ago
Doesn't seem like it [0]:
> [...] so it printed about 8% of the currency. An approximately equal amount of currency was destroyed
> The reason for the sharp upturn in M1 in 2020 is that the measure was redefined in May 2020
[0] https://skeptics.stackexchange.com/a/53092