SaaS prices are spiraling out of control, here’s how to fix them
The enterprise technology market is stuck in a bubble, unnaturally distorted by immense investment and ‘winner takes all’ mindset of venture capitalists hoping that the companies they back will win the greatest share of the market, as quickly as possible. Under pressure to appease VCs and provide near-instant ROI, companies frantically look for the quickest way to repay the investment.
To do so, too often they spend significant amounts on marketing to drive customer acquisition. But as a result – with such big budgets invested and extreme external pressures to satisfy – they have little choice but to increase the price of their software. The customer, who is now faced with a choice of paying over-inflated prices, or missing out on technology entirely, can’t win.
Of course, VCs will be influential for a long time – and Australia is not immune from its influence. Indeed, Salesforce recently announced it had created a sizeable VC fund to invest in Australian startups. But as VC investment continues to grow, SaaS prices are spiraling out of control – a trend that makes enterprise technology unaffordable and inaccessible to all but a select few. That is a recipe for substantial concern. If too few people can access technology because companies inflate their prices, then the SaaS pricing model is broken.
But there is an alternative. An alternative where value is passed not to the investor, but the customer. When a company is unburdened from the shadows of external investment, they can operate with the freedom that they must satisfy no one but their customers. It’s an alternative approach where companies focus on developing innovative software with costs falling, not rising.
Where VC investment is predicated on short-term gains at the expense of longevity, a company who builds steadily for the long term has a competitive advantage. When horizons are set not quarterly, but 10 years from now; companies can think, act and invest with freedom, and prioritise affordable prices that build customer loyalty. After all, longer-term customer loyalty helps build revenue by more sustainable, natural means.
Also Read: Four Indonesian SaaS startups merge to support SMEs digitisation
The more affordable technology, the more people can benefit. That’s why it’s time to escape the VC-fuelled, sales-oriented bubble of Silicon Valley’s enterprise software companies and focus instead on a more customer-centric approach. As an approach, it might not make headlines, and it’s a controversial statement to make in a boardroom, but too much focus on profit destroys profits.
Think for a second, not about profit, but the end user and how they benefit from technology. All over the world, we’re seeing the virtues of accessible technology: from a street vendor in India servicing a global customer base to an online contractor working with some of the biggest international companies from their home in regional Australia. If people can access technology, it unlocks opportunities. It may sound like a romantic notion, but software has the power to change the world for the better.
From how we work to how we shop, advances in the cloud have changed the way we interact with the world. It’s disrupted old and archaic ways of doing things. In few industries is this as obvious as business software – a sector that has seen seismic changes in recent decades.
Expensive, exclusive and exceedingly complicated software that was once the realm of the few, should be easy, accessible and affordable for the masses. If companies are free to make their own decisions, unhindered by external parties with their own interest, the value can be handed back to an end user, not a wealthy investor. That’s how to fix the broken SaaS model.
—
Timothy Kasbe is the Managing Director for Zoho in Australia and New Zealand & Global Large Enterprise
Editor’s note: e27 publishes relevant guest contributions from the community. Share your honest opinions and expert knowledge by submitting your content here.
Image Credit: scyther5
The post The SaaS pricing model is broken, let’s fix it appeared first on e27.