Whatever happened to the pay-as-you-go beauty of SaaS?

Remember when the touted advantage of Software-as-aService was that whole pay-as-you-go model where you could add/subtract users at will and avoid big up-front license buyins? Well, it hasn’t really happened that way.

Most SaaS vendors — you know who they are — want customers to pay for one year of service or whatever in advance for a set number of users. So what’s big diff between paying $125 per user per month for a CRM SaaS as opposed to say, $100,000 or $200,000 to some legacy enterprise software player? Not much. Putting 200 users on Salesforce.com’s enterprise edition costs $300,000 per year list. That’s a pretty Oraclean number.

I touched on that a while ago here but Gartner(s IT) Distinguished Analyst Robert Desisto drove the point home in a blog post last week.  He pointed out that it’s not just the on-premises enterprise software vendors that are ripe for disruption. The supposedly newer-blood SaaS guys are also at risk.

He wrote:

“The reason is the vast majority of vendors who offer SaaS in the enterprise market do so with a fixed term subscription basis. This means there is no ability for a SaaS customer to pay for what they use, something we commonly see with infrastructure as a service or in many lower end consumer or SOHO applications.  This was supposed to be one of the foundational tenants of SaaS but has rarely been offered because SaaS vendors want large contract lock in.  SaaS vendors were also supposed to be agnostic to the end of quarter or end of year deals. Clearly, in my experience of reviewing 100s of contracts a year, SaaS vendor salespeople behave just like their on premise ancestors.”


The Structure Show

On last week’s podcast we heard from Parse.ly CTO Andrew Montalenti about the upside of relying Amazon(s amzn) Web Services — within reason — and we talk about Netflix’ latest engineering feat.

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