How Overpriced Are Your Web Services?

In my Nov.5 post called 8 Steps to running your business on (mostly) free apps, I explained the value of using off-the-shelf software as opposed to costly custom builds, and the frequently unrecognized high value of free alternatives. This article will provide a more specific nuts and bolts description of how you can determine whether the applications you are currently using to power your company’s infrastructure and communications are good enough, and cheap enough — or if it is time to replace your current apps with lower-cost alternatives.
Throughout this article I am going to use WebEx, the online meeting and document sharing service, as an example. This does not mean that WebEx is necessarily overpriced. It is an example of a long-established service that has millions of users and a strong brand. What I am advocating here, is that whenever you use a software service of this type, it’s worth checking to see if a reliable lower-priced alternative has evolved.
As we start, it’s helpful to have a perspective on the technology development cycle. A company, such as WebEx develops a terrific technology, markets it, charges a fee, and successfully develops a user base. In this case, WebEx essentially created the market for controlling remote desktops for sales presentations, demonstrations and other uses. The company achieved a well-deserved success and attracted millions of users.
As the initial innovator, WebEx had the ability to build market share and set the prices it believed the market would accept. Over time, technology evolved and multiple companies started to offer similar services at lower prices or even free. These new offerings may not have been as fully functional as WebEx, but for users who don’t need all of the functions included in WebEx, they may work just fine.
Now, in the face of new and ever increasing competition, a company such as WebEx faces a variety of options. They include: developing lower priced services with fewer features to compete with new entrants, changing pricing models, continuing to develop innovative features that command a premium price, and offering new, related products. Most companies follow some combination of all of these second-stage strategies.
How to evaluate the Costs & Benefits of the Web services you currently use:
1.) Make a list of the Web services use use that are also your largest cost centers.
2.) Assess which of these services could be changed without undue disruption in the organization. For example, it’s far easier to change a conference calling service than a Web host, because of the potential disruption in your operation when shifting the first of these. You now have a short list of service that could conceivably be replaced by lower cost alternatives.
Note: It’s important to recognize that “cost” to an organization is not simply the out-of-pocket cost of a service. Many of the comments to last week’s post made this point, and I agree wholeheartedly. A specific service may cost you less in terms of out-of-pocket dollars but have hidden “costs” because of unexamined impacts. For example, the lower priced service may, in some way, be harder to use or less automated so there is a higher overall cost to the organization in terms of the time involved to use it. While I am comparing prices in this example, it’s essential to factor in these types of associated costs, which may show up in higher dollars or greater time requirements, when considering the overall cost to an organization of shifting services.

3.) Now, see if substantially lower cost alternatives exist.

For example. WebEx’s primary offering to small and medium businesses is the WebEx Meeting Center, which allows unlimited usagee for a monthly license priced at $75 per user for a 12 month term. This usage includes application and document sharing as well as onine meetings, and includes up to 15 people in each meeting. If you buy the WebEx MeetingCenter for five WebEx hosts you are spending $375 per month or about $4,500 per year. (Note: WebEx does offer a lower priced service “MeetMeNow” at $39 per month, when prepaid annually, but this product is labeled for “Individual” users.)
As the founder of Search Free Apps, I am biased in suggesting that this is the best source on the Internet to investigate lower cost alternatives. By searching the phrase “online meetings” at Search Free Apps you will find a service called Yugma that offers a free online meetings options for up to 10 people. Yugma premium,which allows users to “share mouse and keyboard for true realtime collaboration on any application (and remote support),” is $9.95 per month for up to 10 attendees (with no long-term commitment) and $99.95 per year.

4.) Here’s the takeaway:
It’s possible that Yugma could meet your needs. It depends on what features you are using from WebEx, how easy it is to set up each of these features, and the quality of the service at Yugma as compared to WebEx.
Now, To continue with this example, I recommend that at your next Web meeting you use Yugma. Since it’s free, or less than $10.00. The out-of-pocket costs involved in this experiment are minimal, or nonexistent. After you have used the service a few times, you may decide that it meets your needs, cancel WebEx and save the $4,500. If Yugma meets your needs, but you want the application support in the premium option, 5 separate accounts (which appears to be the equivalent of 5 WebEx hosts) Yugma would cost about $50 per month and you would save $3,900 per year and have no annual commitment.
The above analysis is one hypothetical example of how new low-cost services can dramatically lower the cost of your operations. Remember, this example – while hypothetical – involves only one service. The infrastructure and operations of a business can easily involve 20 to 50 different services, depending on the size and complexity of the business.
I started Search Free Apps as a do-it-yourself place where anyone could look for free alternatives to services they are presently using, or investigate free options for services they were thinking of employing.
My commitment to this self-service model remains as strong as ever. In fact, since the launch of the service we have added almost 300 additional high-value free applications: Search Free Apps now includes almost 800 distinct services. After months of seeking alternatives, I can also say with confidence that this is the largest database anywhere of free Web applications oriented toward useful Web services (of the type employed by businesses, nonprofits, home offices, and freelancers). So, Search Free Apps is ideally designed for you to undertake the type of analysis described above—for your business.
Since the launch of the service, I have also been receiving a large number of emails and phone calls from people who feel they don’t have the time to make detailed comparisons of services or may be somewhat confused by the claims made on Web sites, but want specific recommendations of low-cost services. Often, they are also looking for an innovative way to use a low-cost service in place of much higher cost offerings. To serve this need, I will now be offering a limited amount of high ROI phone consulting to assist anyone who is looking to save on the services they are presently using or wants to expand their activities and is looking for a quick set of recommendations on cost-effective services.
Note: I have done my best to accurately reflect the pricing information on the WebEx site. I respectfully request that WebEx officials correct any inadvertent errors or omissions in my discussion, and post their own comments about this article to Found|READ.
Bruce Judson is a Senior Faculty Fellow at the Yale School of Management, the author of Go It Alone!: The Secret to Building a Successful Business on Your Own (one of the first books to be published on the Web, Bruce’s book is yet another free resource for you to tap!), and the founder of Search Free Apps.
Copyright 2007 Bruce Judson. All rights reserved.