6 ms·

It seems like every SaaS out there is targeting only the very occasional users and large enterprise users, but nothing in between. If this announcement read "we

by franga2000 5y ago

It seems like every SaaS out there is targeting only the very occasional users and large enterprise users, but nothing in between. If this announcement read "we're limiting Free Tier, but creating a new 10$/month plan that gives you what you had before" I'd be signing up immediately. But per-user pricing, especially with the lowest plan being 20$/u/m, is absolutely insane for anyone but big corporations and startups drowning in VC money. Some practical examples: - if I participate in a 48h game jam with my usual team, it would cost us 120$ to host our code on GitLab. For 2 days!! - the non-profit I develop for would need to pay 1680$ a year, despite all but 2 of our repos being FOSS. That is literally 3/4 of the budget we had last year! Server load, bandwidth and disk space are the things that cost money and they are barely correlated with the number of users in all but a handful of textbook scenarios. Why does everyone insist on putting customers into price brackets based on such a useless metric?

existencebox 5y ago
My somewhat cynical hypothesis regarding "Why does everyone insist on putting customers into price brackets based on such a useless metric" (And I do not mean this as a dig at Gitlab, to be clear, just an examination of the strategy.) If there is a curve "amount of money a company of a given size will pay", in certain applications, server load, bandwidth, and disk space utilization likely scales far below that trendline, whereas per-user tracks far closer. It also ensures there is effectively no upper bound on CLTV as a given customer scales out, even if net-usage only increases logarithmically/asymptotically. To try and be even-handed and take a more generous interpretation as well, the former is also less likely to be cogently communicable to a customer, and may have painful UX when limits are hit.
- justsomehnguy 5y ago
  You took the words out of my mouth. Except I would say what instead of a certain applications this is true for the most of applications. If something doesn't uses tons of traffic/storage and is user facing then the resources spent per user are minuscule, you would spend more time and (even literal) energy to actually track and bill the user for the spent resources and somehow explain why some resources are billed for the insane rates (because you need to bill some thing for insane rates to make up $10 ARPU/month). I had the same problem recently - I was musing about re-selling my monitoring solution (I'm using it myself, at like ~2% of the VPS I'm renting) and the first thing of course was the idea to base the price on the load each client would generate... and I pretty quickly come to a conclusion what I can't reasonably price things at $0.10 per unit, because the time I would need to spend on the setup is way, way more costly for me than that and that doesn't include billing hassles in any way. So yes, billing per user is not only beneficial for the provider on the "user is paid wherever it uses the resource or not" but also allows the provider to not to spend time and money on actually implementing the way to bill the user for the resources.
  - PaywallBuster 5y ago
    if your onboarding is automated/nearly free and your costs track a certain number (e.g. number of checks/hosts) why would you bill per user? if you did all that and you have the right LTV and CAC numbers, at certain point you could basically run it on auto pilot billing per user, but maybe you have 1 power user in a team, and a few extra accounts for non tech/backup/etc, which login once a month to check something
    - justsomehnguy 5y ago
      > if your onboarding is automated/nearly free It isn't and the cost of developing something... is too much for a side gig with the intended purpose for the VPS to pay for itself. > why would you bill per user? In my situation I don't need to bill per user (and it would be counterproductive for me to do so in the long run), my point here is what my price calculation per resources spent doesn't correlate with my resources cost in any meaningful way, at least with anything with the word 'income' in it. > and your costs track a certain number (e.g. number of checks/hosts) In the end I just drew some arbitrary numbers for a checks/hosts numbers, slapped the price tag of a couple bottles of beer and called it a day. One person was happy with it and he uses only a couple of basic HTTP checks (so maybe around 0.002% of VPS? Who knows). Other one said it was too much for him. *shrug_emoji*
- shostack 5y ago
  Also smaller companies tend to come with an outsize support burden that can chip away their profitability to be a net loss that grows over time. That burden grows the more people you have using the product.
sdflhasjd 5y ago
I definitely agree, per user pricing is also awkward because it prices everyone the same when there's a huge disparity in how they use the product. The same price for developers and testers who use it every day, but also the person who logs in twice a year to generate a report. You end up with a product that's more difficult to use because costs end up influencing who can access it.
- hhh 5y ago
  As with all things, there’s a lot of flex in there. In our environment, if you don’t use it in 90 days your license goes back to the pool. If you log back in after that, you immediately gain it back. Your user is just disabled, not deleted. https://docs.gitlab.com/ee/subscriptions/self_managed/#billable-users https://docs.gitlab.com/ee/subscriptions/self_managed/#billa...
bluescrn 5y ago
The cloud service business model usually seems to turn into some form of bait+switch, based on getting loads of new users in, some percentage who will become quite dependent on the service, then cranking up the prices. If something is free, cheap, and relatively new, be prepared for disappointment.
- madeofpalk 5y ago
  I wouldn't say it's an intentional bait and switch, just the "natual" pivot to b2b/enterprise sales where its a lot more straightforward with how to make money, I guess.
  - pdonis 5y ago
    I have a hard time seeing how offering something for free that costs you something to provide, then making it no longer free once you have a large number of users, is not an intentional bait and switch. How did they think they were going to keep providing the free offering at scale?
donmcronald 5y ago
> It seems like every SaaS out there is targeting only the very occasional users and large enterprise users, but nothing in between. It's like that for everything IT related. I've done part time IT service work for 20 years and in the last 5 years the cost of IT for small businesses has drastically increased. I'd estimate that things like email and network devices (management + updates) have increased by 5-10x for a lot of small businesses. Family run businesses that are providing income for 1 or 2 people can't absorb those kinds of costs. Imagine if every appliance in your house all of a sudden became an annual subscription that's the same amount as the one time cost used to be. That's what small business IT is like now. Normally I'd be optimistic and say all that means is a lot of opportunity for anyone that wants to start a business, but it's not. The high prices are being driven by consolidation and reduced competition in every area where there's some type of barrier to entry. Network devices are the best example. You can't decide to start a hardware manufacturing business without a ton of capital. It's only going to get worse too. My prediction is that within 2 years Ubiquiti will go subscription based, within 5 years Windows will be subscription only for business use, and getting a perpetual version of MS Office will be nearly impossible within the next 3-4 years. I also think both Microsoft and Google will discontinue their non-profit / education offerings by the end of the decade because all the budget friendly options (aka competitors) will be completely eliminated by then.
- judge2020 5y ago
  > I also think both Microsoft and Google will discontinue their non-profit / education offerings by the end of the decade Not going to happen because both of them are buying Mindshare: Microsoft is trying to salvage their staple of being a must-have requirement for office IT with Excel/other MS Office (including Office Online) dominance, while Google is trying to take all of that away and get people hooked on the power of collaborative document/spreadsheet editing, now with Notion-style features like inline people mentions. In general it seems like Google is winning in lower education with the advent of chromebooks, MS is winning on the higher education front (Uni staff don't want to move away from Office), and Google Workspace is winning on the Startup front, but I doubt either offerings are going to charge schools for their basic offerings and will instead opt to throw more new features into their own separately-subscribed SKUs (eg. Google Voice having a different per-user subscription cost).
gfxgirl 5y ago
You mean it would cost you one coffee every 2 weeks and that's too much? Or for your 2 days it would cost one coffee a day.
- andrecarini 5y ago
  > one coffee For the Bay Area developer, sure. For a South American developer, 10 dollars is about three meals.
- franga2000 5y ago
  One long espresso costs 1,3 € in the city centre. Those two days of GitLab access would cost me the equivalent of 68 cups or just over 5 liters!
deleted 5y ago
[deleted]
smcleod 5y ago
Welcome to the world of VC funding :(
brainbag 5y ago
SaaS is definitely hard to price but some trends are hostile. Recently, Netlify contacted us about our pricing and we had a call with them; because we had more than 7 users, based on their new pricing structure we were consider "enterprise" to them, and our bill was going to go from ~$200/mo to $2500/mo (not a typo) very graciously "discounted" for a length of time to $1000/mo. Despite our low usage of resources and features that hadn't changed in a year, they suddenly wanted to charge us more than 10x a month, solely based on user count. If we dropped our user count below 7, we could still have the same pricing. It's absolutely absurd. Zapier has similarly unfriendly user pricing; one of our team needed a few basic simple zaps for a workflow and since it's business process, we needed someone to have access to it too for management. That means we now qualified for the "team plan" which jumps the cost from $0 for the free plan (which already offered more features than needed) to minimum of $299/mo, with a whole ton of resources and features we didn't need, just to have an extra user. For all that cloud pricing is difficult to predict, I'd much rather be charged by usage than arbitrary metrics like users (except where it makes sense).
XCSme 5y ago
As a solo-founder, I have this exact feeling. I can not use almost any SaaS tool as all of them have a (too limited) free plan and the next one starts at around $100/mo with "5 seats". Can't you just give me a $20/mo option with one seat? For example: https://www.gitbook.com/pricing https://www.gitbook.com/pricing Team - $6.40 Per User Per Month *Starting At 5 Users*

existencebox 5y ago

My somewhat cynical hypothesis regarding "Why does everyone insist on putting customers into price brackets based on such a useless metric" (And I do not mean this as a dig at Gitlab, to be clear, just an examination of the strategy.) If there is a curve "amount of money a company of a given size will pay", in certain applications, server load, bandwidth, and disk space utilization likely scales far below that trendline, whereas per-user tracks far closer. It also ensures there is effectively no upper bound on CLTV as a given customer scales out, even if net-usage only increases logarithmically/asymptotically. To try and be even-handed and take a more generous interpretation as well, the former is also less likely to be cogently communicable to a customer, and may have painful UX when limits are hit.

justsomehnguy 5y ago
You took the words out of my mouth. Except I would say what instead of a certain applications this is true for the most of applications. If something doesn't uses tons of traffic/storage and is user facing then the resources spent per user are minuscule, you would spend more time and (even literal) energy to actually track and bill the user for the spent resources and somehow explain why some resources are billed for the insane rates (because you need to bill some thing for insane rates to make up $10 ARPU/month). I had the same problem recently - I was musing about re-selling my monitoring solution (I'm using it myself, at like ~2% of the VPS I'm renting) and the first thing of course was the idea to base the price on the load each client would generate... and I pretty quickly come to a conclusion what I can't reasonably price things at $0.10 per unit, because the time I would need to spend on the setup is way, way more costly for me than that and that doesn't include billing hassles in any way. So yes, billing per user is not only beneficial for the provider on the "user is paid wherever it uses the resource or not" but also allows the provider to not to spend time and money on actually implementing the way to bill the user for the resources.
- PaywallBuster 5y ago
  if your onboarding is automated/nearly free and your costs track a certain number (e.g. number of checks/hosts) why would you bill per user? if you did all that and you have the right LTV and CAC numbers, at certain point you could basically run it on auto pilot billing per user, but maybe you have 1 power user in a team, and a few extra accounts for non tech/backup/etc, which login once a month to check something
  - justsomehnguy 5y ago
    > if your onboarding is automated/nearly free It isn't and the cost of developing something... is too much for a side gig with the intended purpose for the VPS to pay for itself. > why would you bill per user? In my situation I don't need to bill per user (and it would be counterproductive for me to do so in the long run), my point here is what my price calculation per resources spent doesn't correlate with my resources cost in any meaningful way, at least with anything with the word 'income' in it. > and your costs track a certain number (e.g. number of checks/hosts) In the end I just drew some arbitrary numbers for a checks/hosts numbers, slapped the price tag of a couple bottles of beer and called it a day. One person was happy with it and he uses only a couple of basic HTTP checks (so maybe around 0.002% of VPS? Who knows). Other one said it was too much for him. *shrug_emoji*
shostack 5y ago
Also smaller companies tend to come with an outsize support burden that can chip away their profitability to be a net loss that grows over time. That burden grows the more people you have using the product.

sdflhasjd 5y ago

I definitely agree, per user pricing is also awkward because it prices everyone the same when there's a huge disparity in how they use the product. The same price for developers and testers who use it every day, but also the person who logs in twice a year to generate a report. You end up with a product that's more difficult to use because costs end up influencing who can access it.

hhh 5y ago
As with all things, there’s a lot of flex in there. In our environment, if you don’t use it in 90 days your license goes back to the pool. If you log back in after that, you immediately gain it back. Your user is just disabled, not deleted. https://docs.gitlab.com/ee/subscriptions/self_managed/#billable-users https://docs.gitlab.com/ee/subscriptions/self_managed/#billa...

bluescrn 5y ago

The cloud service business model usually seems to turn into some form of bait+switch, based on getting loads of new users in, some percentage who will become quite dependent on the service, then cranking up the prices. If something is free, cheap, and relatively new, be prepared for disappointment.

madeofpalk 5y ago
I wouldn't say it's an intentional bait and switch, just the "natual" pivot to b2b/enterprise sales where its a lot more straightforward with how to make money, I guess.
- pdonis 5y ago
  I have a hard time seeing how offering something for free that costs you something to provide, then making it no longer free once you have a large number of users, is not an intentional bait and switch. How did they think they were going to keep providing the free offering at scale?

donmcronald 5y ago

> It seems like every SaaS out there is targeting only the very occasional users and large enterprise users, but nothing in between. It's like that for everything IT related. I've done part time IT service work for 20 years and in the last 5 years the cost of IT for small businesses has drastically increased. I'd estimate that things like email and network devices (management + updates) have increased by 5-10x for a lot of small businesses. Family run businesses that are providing income for 1 or 2 people can't absorb those kinds of costs. Imagine if every appliance in your house all of a sudden became an annual subscription that's the same amount as the one time cost used to be. That's what small business IT is like now. Normally I'd be optimistic and say all that means is a lot of opportunity for anyone that wants to start a business, but it's not. The high prices are being driven by consolidation and reduced competition in every area where there's some type of barrier to entry. Network devices are the best example. You can't decide to start a hardware manufacturing business without a ton of capital. It's only going to get worse too. My prediction is that within 2 years Ubiquiti will go subscription based, within 5 years Windows will be subscription only for business use, and getting a perpetual version of MS Office will be nearly impossible within the next 3-4 years. I also think both Microsoft and Google will discontinue their non-profit / education offerings by the end of the decade because all the budget friendly options (aka competitors) will be completely eliminated by then.

judge2020 5y ago
> I also think both Microsoft and Google will discontinue their non-profit / education offerings by the end of the decade Not going to happen because both of them are buying Mindshare: Microsoft is trying to salvage their staple of being a must-have requirement for office IT with Excel/other MS Office (including Office Online) dominance, while Google is trying to take all of that away and get people hooked on the power of collaborative document/spreadsheet editing, now with Notion-style features like inline people mentions. In general it seems like Google is winning in lower education with the advent of chromebooks, MS is winning on the higher education front (Uni staff don't want to move away from Office), and Google Workspace is winning on the Startup front, but I doubt either offerings are going to charge schools for their basic offerings and will instead opt to throw more new features into their own separately-subscribed SKUs (eg. Google Voice having a different per-user subscription cost).

gfxgirl 5y ago

You mean it would cost you one coffee every 2 weeks and that's too much? Or for your 2 days it would cost one coffee a day.

andrecarini 5y ago
> one coffee For the Bay Area developer, sure. For a South American developer, 10 dollars is about three meals.
franga2000 5y ago
One long espresso costs 1,3 € in the city centre. Those two days of GitLab access would cost me the equivalent of 68 cups or just over 5 liters!

deleted 5y ago

[deleted]

smcleod 5y ago

Welcome to the world of VC funding :(

brainbag 5y ago

SaaS is definitely hard to price but some trends are hostile. Recently, Netlify contacted us about our pricing and we had a call with them; because we had more than 7 users, based on their new pricing structure we were consider "enterprise" to them, and our bill was going to go from ~$200/mo to $2500/mo (not a typo) very graciously "discounted" for a length of time to $1000/mo. Despite our low usage of resources and features that hadn't changed in a year, they suddenly wanted to charge us more than 10x a month, solely based on user count. If we dropped our user count below 7, we could still have the same pricing. It's absolutely absurd. Zapier has similarly unfriendly user pricing; one of our team needed a few basic simple zaps for a workflow and since it's business process, we needed someone to have access to it too for management. That means we now qualified for the "team plan" which jumps the cost from $0 for the free plan (which already offered more features than needed) to minimum of $299/mo, with a whole ton of resources and features we didn't need, just to have an extra user. For all that cloud pricing is difficult to predict, I'd much rather be charged by usage than arbitrary metrics like users (except where it makes sense).

XCSme 5y ago

As a solo-founder, I have this exact feeling. I can not use almost any SaaS tool as all of them have a (too limited) free plan and the next one starts at around $100/mo with "5 seats". Can't you just give me a $20/mo option with one seat? For example: https://www.gitbook.com/pricing https://www.gitbook.com/pricing Team - $6.40 Per User Per Month *Starting At 5 Users*