from Hacker News

The Commoditization Of SaaS

by itsprofitbaron on 6/17/13, 10:33 PM with 15 comments

  • by limejuice on 6/18/13, 12:51 AM

    There is intense competition in the Saas space, but competition is different from commoditization imo.

    The simpler the Saas service, and the lower cost of switching, the more competition and commoditization that may go on. But this article is talking specifically about Saas replacing enterprise software. Software is sticky, and some software is very sticky because it is mission critical, highly integrated into the business workflows, and/or there is significant user interaction.

    For example, if a company has 500 sales people all happily using salesforce.com, why would a CIO disrupt everyone's work to switch to a cheaper but different product? The cost of salesforce.com is not a significant cost to the business, but the cost of disrupting people's productivity swamps any savings you might from switching to a cheaper service.

    This is similar to someone telling a company to drop MS Office because OpenOffice or GoogleDocs have equivalent "good enough" functionality and are free. There is no 'commodity' version of MS Office which looks and behaves exactly like MS Office but just with a lower price.

  • by programminggeek on 6/17/13, 11:23 PM

    I think there are two conflating ideas here, commoditization and uniqueness. Commoditization will happen over time, especially with open source becoming a bigger part of more industries, but that doesn't mean you need to rush to become a commodity.

    You should start with something unique and keep making unique things that delight the people who are willing to pay for those things.

    It's not a complicated idea, but it takes focus and time to really get to know your customers and their needs.

  • by oneye on 6/17/13, 11:20 PM

    > Chances are that your company or your industry will be commoditized especially when you don’t think it can happen because, in reality commoditization always happens

    Everything else in the post rests on this, and I'm not sure that its true. Do you have research or statistics to support this claim?

    I'm curious what these industries are. Oil? Investment funds? Pharmaceuticals?

    I'm thinking that there are a few industries where commoditization has not happened over the last few hundred years. Of these, I'm curious how many of the industries commoditization could happen in, but has not, and how many (for some reason) are strongly resistant to commoditization.

  • by mathattack on 6/18/13, 1:52 AM

    This is the tradeoff... SaaS gets great margins because it's not custom. There's a high fixed cost, then each incremental addition has benefit. Even with a low marginal cost this is true. The #1 SaaS can also add lot of features and increase reliability and spend more on Marketing.

    You could argue that Wal-mart is a commodity too. It's just stores and the same stuff as K-mart and 7-11. But it crushes them. There's room for both Wal-mart and Tiffany's just like there's room for a SaaS for your billing system, and Accenture to build a custom one.

  • by badclient on 6/18/13, 1:25 AM

    As a result, by commoditizing yourself and creating a new unique selling point which is, unique to you, important to your customer (or potential customers) and is defensible against your competition, on top of your SaaS you can increase demand and give yourself the opportunity for highly profitable growth.

    I don't follow. Okay so I find a selling point but what exactly makes it defensible or 'unique'?