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Ask HN: Why is everything a SaaS product?

• maxwell 4y ago
  Margins.
• smt88 4y ago
  Jetbrains can offer a perpetual license[1] in theory because old versions don't continue getting updates. They spend (relatively) little on "supporting" old versions -- mostly just the cost of the download servers. The two use cases you described don't work that way. Both of them have cloud components, which means they need frequent security patches, and they likely also need bug fixes and other updates. "Connects to my different accounts" by itself is a huge undertaking that most people outsource to Plaid or a similar vendor. So to answer your question: a lot (not all, but most) SaaS products are services because they are services. They are updated incessantly by developers and have rolling updates. 1. https://sales.jetbrains.com/hc/en-gb/articles/207240845-What-is-a-perpetual-fallback-license- https://sales.jetbrains.com/hc/en-gb/articles/207240845-What...
  • brianwawok 4y ago
    To me, the keep your old version forever was a thing Jetbrain did to "soften" the blow when going from buy once, use forever.. to buy every single month. Still, one of the most valuable softwares I pay for.
    • that_guy_iain 4y ago
      A lot of people really didn't like the fact they were going from having a perpetual license to having a subscription. The reality is, the way it worked out is basically the same as before but I could pay monthly. Since I paid for my own license instead of allowing an employer to buy it (so I could get IntelliJ for all languages instead of getting a language specific version) that was nicer.
• streetcat1 4y ago
  Jet brain moved to subscription first. The reason is that you do not want to start over each month sales wise. Again, as a consumer you can "consume" what is offered in the market. I.e. if you have an option to not buy, the seller has the option to maximize its profit.
  • JohnFen 4y ago
    > Jet brain moved to subscription first. This is why I stopped using their software.
• moomoo11 4y ago
  It’s a model that makes money printer go brrrrr Most customers like it, it keeps the company able to push newer features and maybe up sell them.
• philippejara 4y ago
  Because people pay for it and companies like money, it's a bit of a dismissive answer but it's just what it is really.
• pier25 4y ago
  Because having a constant cash flow fits better the model of a software company since you need to keep a dev team in perpetuity. You can't hire devs per project like in construction. Developing commercial software requires maintenance, knowing the codebase, etc.
  • postalrat 4y ago
    The difference is software companies hire programmers while companies that sell physical goods hire engineers. Engineers work hard to get it right the first time while programmers are constantly fixing their mistakes.
    • candiddevmike 4y ago
      This is a dumb take, product recalls happen all the time if the issue is bad enough, otherwise everything else flies under the radar. All physical goods eventually need upkeep, too.
    • deleted 4y ago
      [deleted]
    • zihotki 4y ago
      You probably don't understand how either of them work. Do you remember for how long Apple was trying to fix problems with their butterfly keyboards?
    • conductr 4y ago
      Are they fixing mistakes or constantly adapting to new/expanding requirements? Try adding an extra bedroom or 3 mid-construction on a house that had perfectly designed plans. One might be doable, seem easy even but 3 might require a new foundation or something to carry the load (scale). What if the ask is to pivot to a commercial property. Now you have to physically move it to piece of land that is zoned appropriately. Or maybe just tear it down and start over (refactor). Those aren't mistakes, they just weren't planned when construction began yet have insane implications to the builders. Planning and expanding software never ends like it would when you complete a tangible finished good.
• cammikebrown 4y ago
  Capitalism, baby! Companies have figured out they can take more of your money if they extract it little by little instead of in chunks.
• that_guy_iain 4y ago
  1. Easier to manage updates. If you control the service you can ensure it's up to date. If everyone is using their own version you have to deal with bug reports for bugs that have been fixed. 2. As many point out, subscriptions are best for a business because it's recurring revenue and you can grow. One off sales makes this harder. 3. The Jetbrains model is basically subscription model now. They only allowed you to have perpetual license because of backlash. However, I liked their approach of you can have a peretual license for the version that was available 12-months before your subscription ended. It's what I'm going to be using with my product with a slight modification. 4. As you point out, you're likely to forget about a subscription therefore the company makes money while basically providing nothing. 5. Overall, the problem is that everyone is accepting the current setup and paying for subscriptions instead of buying things so more companies are getting in on the gig.
  • kevivni 4y ago
    OP here: Those are fair points. I get it from the business' perspective and also from a software developer's perspective. Its unfortunate that there is so little option for a consumer here when they are just wanting to just simplify their lives without sharing their personal data and/or subscribing to a service.
    • whiplash451 4y ago
      Technically speaking, you could totally imagine a SaaS software that does not require you sharing your data. These two things are fairly orthogonal.
      • JohnFen 4y ago
        How so? At the very least, you need to have some sort of payment method on file with the company.
        • xboxnolifes 4y ago
          Only for automatically recurring subscriptions. If subscribers are willing to to manually renew every pay period, the payment methods don't need to to stay on file (outside of the bare minimum required for tax purposes).
• candiddevmike 4y ago
  As someone who built a SaaS for your 2nd use case (Homechart: https://homechart.app https://homechart.app, lifetime license available!), the real reason is any kind of software that integrates with other things has an ongoing maintenance cost that needs to be paid by all of the users to keep it working. Like connecting to your bank accounts, that's not a one and done thing typically.
• theonemind 4y ago
  I really dislike the subscription model and avoid it wherever I can. It serves the software publisher at the expense of the user. If I can't license your product, I'll pay by usage of resources or usage of minutes or hours. I won't pay for access. I will pay to use the product.
• CharlesW 4y ago
  Because businesses with a recurring revenue/subscription model are valued far higher than comparable "buy" businesses. And of course, the more guaranteed revenue you can demonstrate, the more valuable your business is going to be for potential acquirers. “Because a high percentage of the revenue of a subscription-based business is recurring, its value will be up to eight times that of a comparable business with very little recurring revenue,” claims Warillow. https://www.techradar.com/news/how-recurring-revenue-can-increase-the-value-of-your-business https://www.techradar.com/news/how-recurring-revenue-can-inc...
  • karatinversion 4y ago
    My pet theory is that the rise of SaaS in the 2010s is largely a function of the low prevailing interest rates. Standard pricing says that if interest rates are 0.5%, an annual recurring payment of $100 is worth $20,000; but if interest rates are 5%, like in the 90’s, it is only worth $2,000. With the fed increasing rates, maybe we’ll see a return to pay-once software?
    • benlumen 4y ago
      Are you saying that because for the SaaS company, $100 in income can service $20,000 in debt?
      • karatinversion 4y ago
        That’s one way of looking at it. From the investor (and thus valuation) point of view, you need to pay $20,000 lump sum to obtain a recurring interest payment of $100.
• autoexec 4y ago
  Money and power. It lets companies squeeze more cash out of their customers over time and it lets them make whatever changes they want to something people have already paid for, leaves the door open for things like continuously collecting their user's personal data, and can help make it more difficult for users to migrate away from their product. It's terrible for users who value their money, security, and privacy, but vastly more profitable for companies so most companies will offer it increasingly leaving users with fewer options for anything else.
• claudiulodro 4y ago
  Even if we disregard the recurring-monthly-fee part of SaaS, which is popular because it makes more money, I think the "cloud" part is a main reason there are so many. Nobody wants to deal with creating installable business software, and businesses mostly don't want to deal with installing software across their systems. It's much simpler for a small dev team to have the software live inside a website, and it's relatively simple to bolt on a monthly fee for access to a website.
  • jaywalk 4y ago
    This is the big one. It's far easier for both sides to use the "cloud hosting" model. The seller only has to worry about deployments on their own systems, and the buyer doesn't have to worry about deployments at all. It really is a win-win.
  • dgudkov 4y ago
    > businesses mostly don't want to deal with installing software across their systems And now they have to deal with cloud leaks of sensitive data that they no longer control and various SOC2/ISO "certifications" increasingly look like security theater and a "feel good" measure because they don't guarantee anything.
    • lotsofpulp 4y ago
      What is there to deal with? No one cares about leaks, and at most you give out some cheap credit reporting nonsense. A data breach is hardly news anymore.
  • keymon-o 4y ago
    Time for an anecdote. I have recently witnessed a medium large company with a paranoid CEO, obsessed with business security, owning physical servers only for internal needs, hosting every single needed service, hoarding all the data. And just overnight they started switching these services to SaaS based one by one. Why? Lack of on-premise and offline based software. Consequently, the innovation today is almost exclusive to SaaS based products. On-premise and offline client software is just becoming an optional expensive side-product of every SaaS product. But it's a pretty logical step forward. As for the value, SaaS eliminates administration, installation, hardware, technical support and security hastle and majorly cuts the costs for a client company. As for the price, we always praise the always blooming software industry, successful startups, awesome jobs with so many perks and benefits, but someone has to pay for it. I think people don't consider that software is just getting very valuable and too expensive to make and it just makes more sense for companies to rent it then to own it forever.
• recursivenature 4y ago
  Completely understand the comments around valuation of a recurring revenue business and ongoing maintenance. Those are all true and accurate. I've also been thinking about this from an ecosystem standpoint that it is now very difficult to develop a software product that is not SaaS. If everyone else is SaaS, and you are not, your business will be: - Valued lower than equivalent revenue SaaS businesses, because revenue is lumpy and comparatively unpredictable - Have greater difficulty raising capital, because investors aren't used to valuing non-SaaS businesses any more - Have greater difficulty hiring engineers, as they know the next job they have will likely be SaaS related - Slower sales cycle due to higher upfront price required (IE - Doesn't automatically fit on an employee card for land and expand) - Higher customer acquisition costs, as most customers, other than those on HN, are used to the subscription model and prices, and would encounter sticker shock at the high prices required to make a one time purchase work
  • TAForObvReasons 4y ago
    > most customers, other than those on HN, are used to the subscription model and prices, and would encounter sticker shock at the high prices required to make a one time purchase work This one has basically come full circle last year. [1] Many "customers, other than those on HN" have been burned by subscriptions in the past and are rightfully using pricing models assuming a 10x service spike in the future. We've found it easier to sell one-time units for $25000 than subscriptions of $250/mo [1] https://news.ycombinator.com/item?id=28372532 https://news.ycombinator.com/item?id=28372532
    • deleted 4y ago
      [deleted]
  • pleas4nt0ne 4y ago
    So we have settled on one model that VCs understand and manufactured consent to be ruled by that model by relying on VCs So much for being risk takers and disruptors. Sounds a whole lot like the opposite. What’s old is new again. Why do we continue to value people who do not do real work but, like a preacher, latch onto a meme that has others work for them?
• JAA1337 4y ago
  In general SaaS vertically scales to increase demand which means factors of increased revue with no new work.
• bearjaws 4y ago
  It's best to think of it as three loops. 1. The loop of just regular maintenance. How long is that version of Node supported? 2 years? Alright assuming you did literally nothing, no bugs, nothing else your software is already needing to be tested against a new major version in just 2 years. 2. External loops, integrate with XYZ platform? Oh version 1 is EoL in 2 years? Guess you need to get on upgrading to API version 2! 3. Someone uses your out of date software and runs into an issue, now they email you, tweet at you, complain that your software sucks and you should support it better. (My first job would get this all the time for software we released 6+ years ago) Oh you fixed that bug in the new version? "I should get it for FREE!!" Who is going to do this work for free? Even if you cut the support emails down to a minimum, that alone costs money to automate... Another favorite of mine was complaining about price, "$5,000 for a perpetual license?!"
  • keymon-o 4y ago
    Even tech people became like the old school folks complaining about charging for fixing a computer or the ol' "$500 for a website!?". People get spoiled with so many free services and content provider around them and never consider that someone has to actually pay for it. Even tech people live in this ever-blooming software industry with above average paychecks, perks and benefits, but never think about who is really covering for that. Software development is expensive, value it can provide is high, businesses provide SaaS to enable companies to attract them and pay for the value they use and get. There will always be attempts at price manipulations, but if software is used and business is profitable - the price is reasonable.
• drivingmenuts 4y ago
  Rental fees, so to speak. Software as a service becomes a rental property and owners can milk consumers for more money over time as well as introduce features to encourage lock-in. Basically, you're teaching frogs to boil themselves.
• Macha 4y ago
  Jetbrains wanted to go full subscription too but their userbase revolted.
• userbinator 4y ago
  "You will own nothing, and be happy." I don't know about the second part, but they sure are trying to push the first. As many others here have noted, the reason is money, or more precisely, greed and control.
• PaulWaldman 4y ago
  I won't elaborate on the very real pessimistic comments because those are addressed from others. What I haven't seen mentioned are scenarios with non-technical customers. In the extreme use case of resource intensive software with completely non-technical customers, who is going to man the ship? It's like selling someone a car who is incapable of driving. Even if you provide an on-prem system turn-key, who is going to manage and maintain the system? Yes, you can sell perpetual licenses with support agreements, but the delimitation of responsibilities will be difficult for non-technical customers to understand. SaaS essentially allows customers to outsource their IT operations.
  • whizzter 4y ago
    Exactly, as much as we love open source in many ways it's also kind-of destroyed the mid-segment of fixed-software sales(the dBase, Lightwaves, Turbo Pascals,etc) and we really need a way to find back to it. Because not only is people not gaining income from their work (even if for example the Blender foundation exists.. how many people can live off it?) but we're also straining a lot of open source developers with support that really needs to be paid-for in some fashion. I don't fault Stallman in this instance(not a fan in general), the GPL always allowed re-sales and I think he did see something akin to the shareware world even with free software, but what happened was the combination with the Internets ubiquity made everyone just jump to the source (kind of rightfully due to bad shenanigans by middlemen actors like SourceForge or worse) leaving potential supporting middlemen screwed.
    • mjevans 4y ago
      Stallman would probably be happy with the idea of paying an expert who used open tools. It's no different from taking a bus, or hiring a taxi if you don't know how to drive. My impression is that the key aspect revolves around freedom to participate in society. In theory anyone can run their own email, irc, matrix, etc servers. Anyone is free to use an off the shelf open source product, a paid product, or even write their own if there is need.
  • themoonisachees 4y ago
    Ms exchange and aws, azure come to mind. The cost of paying $10
• joewadcan 4y ago
  People have already mentioned all the technical aspects, or blamed capitalism... but I really think it's just the best fit for the benefits that software delivers. It provides lower barriers to try for consumers and higher long term rewards for the company that builds the software. You can certainly find companies that have a flat rate or fixed price, but the incentive to build those projects from the beginning is usually outcompeted by the incentive to build a subscription product.
  • JohnFen 4y ago
    > I really think it's just the best fit for the benefits that software delivers. How so? The only "benefit" you cite for the user is lower cost of entry, but the total cost of using the software over time is higher, so that's not a clear benefit. From a user's point of view, SaaS does have some other benefits, certainly, but it also comes with some rather large drawbacks. So it seems to me that, on the whole, it all just adds up to software costing more.
• fdr 4y ago
  Personally, I find it a lot easier to address bugs on the producer side of SaaS. Back in the Bad Old Days where I worked on a proprietary database delivered to a customer to run on their servers with general-purpose staff, getting high quality bug reports and working our way to resolution was a major issue, and a very expensive part of the development process.
• mfer 4y ago
  There are a few reasons: 1. Higher total revenues. If you compare the subscription fee with the sale fee and how often sales happen. 2. More predictable revenue. There are many reasons people want that. 3. The more information (metadata/telemetry) they have on you the more they can use that for something else. That could be details on how you use the app. If they host your photos they may use those photos to train an AI. Things like that. 4. Finding and tracking unlicensed users is easier to stop and manage. Everything is tied to a SaaS. Less stealing software which cuts into revenue. There are other reasons, too. In a capitalistic society where the goal is constant revenue growth, SaaS provides a means to do that more effectively. Look at the goals.
  • stingraycharles 4y ago
    I’d also add: it’s easier to operate and iterate. If you have a thousand different installs that you need to provide support for, that makes for a very challenging support and maintenance responsibility. People need to be able to operate the software themselves, and may not upgrade when you want them to. SaaS on the other hand means you, the vendor, are in full control. Sure, it means you need to be able to scale it, but you and only you completely own the infrastructure, which makes things so much simpler.
• macspoofing 4y ago
  >I understand the advantages of Saas - transparent updates, cloud based, redundancy, subscriptions, scaling, unicorns etc. You answered your own question.
• somesortofthing 4y ago
  One reason is that SaaS pricing is an easy way for people to "hack" corporate spending restrictions. You need accounting approval for that perpetual $10000 software license, but a $500 monthly subscription payment is totally at your discretion, even if you end up spending more of the company's money in the end.
  • wolpoli 4y ago
    I am not in accounting/finance, but the world has been on SaaS for so long that it's hard to imagine that the department responsible for controlling spending hasn't caught on and plugged this loophole.
    • somesortofthing 4y ago
      Yeah this is less true than it used to be but it's a big part of how SaaS initially came to be the only game in town.
• scarface74 4y ago
  You can’t sustain a business on one time sales. Operating systems change, markets change, and products need continuous updates. Besides, managing servers is “undifferentiated heavy lifting”, why would most companies invest in infrastructure that “doesn’t make the beer taste better”
  • llanowarelves 4y ago
    Yeah but it's not like that software had lifetime free updates either. You pay for that full version (3.x to 4.0, or 3.2 to 4.2). Want updates? Pay for an upgrade. This is how a lot of software still works, and so the devs aren't perpetually working for free to existing customers.
    • scarface74 4y ago
      In that case you are holding back updates even though they are ready for the “major” update. What if the “update” is just compatibility/features for new browsers/mobile OS versions? Besides, there is no “upgrade pricing” in either mobile OS.
      • llanowarelves 4y ago
        That's a good point, but essentially what Waves Audio does with their plugins (OS compatibility forces you to upgrade). Mobile is a nightmare, no disagreement there. You have to keep all APIs up to date (new OS release every year?) as unpaid labor for fixed-price apps. You're sort of forced into service model, not goods.
• UI_at_80x24 4y ago
  Rent seeking behavour
• SilasX 4y ago
  Because enforcement of their copyrights in the digital asset itself, that you would prefer to by, is extremely difficult. SaaS sidesteps the piracy problem entirely.
• hkon 4y ago
  Money
• bitL 4y ago
  JetBrains tried to switch to the usual subscription model when they got new management and due to a massive backlash they ended up with a gobbled subscription similar to their superior previous licensing model.
• JohnFen 4y ago
  Everything is SaaS because rent-seeking is hugely in fashion. Companies want you to pay them on an ongoing basis.
• seydor 4y ago
  I wonder why SaaS has not spilled over to other businesses, ie. food as a service, car as a service, fridge as a service etc. It exists in some cases, but it s not popular
  • HeyLaughingBoy 4y ago
    Well, you can rent appliances and cars and there are services that will cook and deliver food for you for a monthly fee. So yeah. All those things are available on-demand or as recurring service.
  • jabroni_salad 4y ago
    you just described Rent-a-center, and they've been around for awhile.
  • MangoCoffee 4y ago
    SaaS business model is nothing new. it just another form of contract. my employer is in utility management/service. they sign yearly contract with city and MUDs. i don't see the difference between monthly fee (contract) and yearly/multiple years.
  • didibus 4y ago
    It has. I'm subscribed to a weekly milk and veggie delivery. Car leases for rentals has been a thing for decades. Ok I can't think of fridge as a service... But what about extended warranty plans and servicing?
  • Bilal_io 4y ago
    I think you're looking at it backwards, other stuff as a service is the OG, and SaaS is the relatively new thing. Food as a Service: Restaurants, Cafes, Uber eats, Door dash, and other services that rich people use where they order food to be made and delivered by a private kitchen (not an open restaurant) Car as a Service: Taxis, Yellow Cab, Uber, Lyft, car rentals, and car leasing Fridge as a Service: there are stores that would rent you a fridge, it's not as common, as most rental places come with fridges, but I've seen many in Houston without. I've also seen Laundry machine and Dryer rentals [Anything] as a Service: they exist, but not common or unknown to people like you and me. For example there are dog walking services. Another one that appeared in the past decade is related to clothing where you get a box every month that contains some clothing articles, or others that would assign a personal stylist to help you shop for clothes... Etc
• skadamat 4y ago
  1. Recurring Revenue In some sense, every business dreams of wanting to be a recurring revenue business. - Gyms want you to pay monthly, and discount annual plans (and sometimes discount again if you try to cancel your annual plan) - Restaurants want you to come frequently, 6th time is a free sandwich or coffee - Bars want you to come to happy hour, at the same time, every day - Content creators often have a daily, weekly, biweekly, or monthly cadence SaaS is all about recurring revenue. In theory, SaaS aligns incentives because you can quit once the product or service deviates from your expectations or no longer serves your needs. Of course, in practice, SaaS companies want to keep the monthly / annual drip coming and may make it hard to export your data or switch providers. Local first software could be one antidote to this (https://www.inkandswitch.com/local-first/ https://www.inkandswitch.com/local-first/) and perhaps there are others. 2. SaaS loosely resembles old-school semiconductor VC investing SaaS is similar to old-school tech VC investing because the marginal cost is low but the upfront cost is somewhat high / fixed. A lot of investment houses think in terms of recurring revenue as well (e.g. your mortgage is a monthly payment). So if you want external funding, show a premise of recurring revenue!
  • c-linkage 4y ago
    You are correct, but I also hate that "recurring revenue" is the right answer. Not only does a subscription fee act as a constant resource drain (as opposed to a one-time charge) but it further pushes society into the zone of "you won't own anything and like it". Human life and the ability to interact with others and our environment should not be reserved to those that can sustain a high velocity of money. Focusing on a consistent cash flow makes financial management easy but makes everything else suck. It optimizes for the wrong metric. UPDATE: You can also look at subscription fees as a tax on productivity. If I pay once for Adobe software I can amortize that over the entire time I use it, and eventually the monthly cost will reach nearly zero. With a subscription fee I can never amortize the software, meaning the fee is effectively a tax. And if I stop paying the fee I completely lose my ability to use the product.
    • WA 4y ago
      On the other hand, you can regard one-time fees as subscriptions in disguise, because hardly any useful software can be used forever. File formats change, collaboration changes, operating systems change. Yeah you could run your bought-once MS-DOS accounting software in a VM forever, but most useful software has a clear expiration date, especially if you try to collaborate on data.
• deleted 4y ago
  [deleted]
• heavyset_go 4y ago
  Subscriptions are the ultimate rent-seeking business model for software and online services. When you need to increase profits to justify insane valuations, eventually you need to start wringing your customers dry.
  • falcolas 4y ago
    See: Adobe Cloud I cant think of a more exploitative “SAAS” off hand.
    • llanowarelves 4y ago
      They buy good software and then neglect them until they fall into disrepair or kill them off. Extracting rents the whole way. Slumlords of software.
  • CharlesW 4y ago
    BTW, subscriptions/recurring charges aren't "rent seeking" per se. https://www.investopedia.com/terms/r/rentseeking.asp https://www.investopedia.com/terms/r/rentseeking.asp
    • JohnFen 4y ago
      As I read the article you link to, the vast majority of SaaS appears to qualify as rent-seeking. The exceptions would by the things that can only usefully operate "as a service". But that's a minority of the SaaS offerings.
      • CharlesW 4y ago
        > As I read the article you link to, the vast majority of SaaS appears to qualify as rent-seeking. The word "rent" can be confusing. Knowing that "rent" in this case means economic rent and not the recurring payments you make to a SaaS provider, which SaaS vendor are you thinking of, and how are they rent-seeking?
        • 4y ago
• btbuildem 4y ago
  The questions feels directed more towards B2C, but let me share a B2B take: From a business perspective, a SaaS solution can be a ramp to platform lock-in. Once your customers have committed, and your software is part of their business workflows, it's expensive to move away from it. Another reason is that (for sufficiently complex solutions) the software portion is just part of the service - the business can also offer consulting services for onboarding / migration and customization. That's an entire new revenue stream.
• slt2021 4y ago
  1. everything is mobile: people consume software from phones, tablets, personal laptops, work laptops, desktops, corporate servers. How do you imagine yourself installing your software 5-6 times for a single customer??? 2. now imagine updating your software with new release/bug fix. royal pain. these two factors are enough to choose saas
• pryelluw 4y ago
  Rent seeking behavior is being adapted into all products with the goal of replacing ownership with controlled access. Once people use your service they are likely to be locked in and stay
• RobRivera 4y ago
  gotta pump those ARR numbers baby
• ppjim 4y ago
  This has to do with both a technological and economic change. Let's say it's the equivalent of music and movies we go from "owning" through physical devices, then to virtual and now streaming. We are moving to a society where we will no longer own anything and will only use services. This is not only happening in software. We can have car-as-a-service, food-as-a-service, and the list goes on.
• pastacacioepepe 4y ago
  It's just that having a recurring revenue allows you to offer features that you wouldn't be able to otherwise, and people WANT those features. For example, as a B2b software company, there is no way I'm offering customers any complex cloud functionality, especially involving data storage, if I can't guarantee that I will be able to cover the costs in the future. Thus recurring revenue is a must. On the other hand, if you just need an offline app that can work fine without being updated frequently, probably a single upfront payment is better suited. This is nothing new by the way, multiplayer games have worked this way for a long time. In general a multiplayer game that asks you a subscription fee has a much higher chance of being kept online for longer. See WoW. Without subscription fees they would have probably shut down a long time ago.
• AussieWog93 4y ago
  As someone who runs a retail (eCommerce) business for a living, I think it's also worth pointing out that people get far more "rational" about their purchases when you ask them to spend a large chunk of money at once. The same person who would think "do I really need this?" when faced with spending $1200 on a high-end automatic espresso machine wouldn't even think about spending $5 a day on a takeaway latte (which ends up being an order of magnitude per expensive once you amortise the cost of the machine over the number of cups produced).
  • Gigachad 4y ago
    There is far less risk for ongoing expenses. So many times I have gone and paid the up front cost and then not used the product nearly as much or for as long as I imagined and ended up making a huge loss compared to having subscribed or rented it.
• stetrain 4y ago
  For 1), what exactly are you expecting to happen to enable this cloud backup to continue working? You pay once for someone to set up a hard drive in the "cloud" you can put your photos on? They charge you enough for a lifetime of transfer bandwidth? What happens when the hard drive dies? Do you want redundancy so that if one drive dies the photos aren't lost? Who pays the tech to go change out the first drive when it fails so it can recover before the others in the array also die? What's your personal risk aversion for losing this data? Even a two-drive RAID array can lose all of your data in some scenarios. For 2), you want an app that connects to all of your accounts. How does it do that? Usually by using web APIs or a third party interconnect like Plaid. What happens when they bank you use updated their API? Who is going to provide you with updates to keep all of these account connections working? --- Both scenarios you describe have ongoing maintenance. Things weren't SaaS when they existed solely on your local computer and continued working without constant maintenance, but your two examples that come to mind show how our expectations of technology have changed and we expect things to work online, backed-up, and to keep working even as integration partners, OS vendors, etc. update their systems.
  • teraflop 4y ago
    I think the point is that you should be able to use one commodity service to handle your data storage and syncing needs. (Or maybe a couple different ones, if you're worried about your account getting terminated.) But that doesn't mean you should have to be nickel-and-dimed by subscriptions for every individual application you want to use.
    • stetrain 4y ago
      Sure, I could build a photo app for a one-time purchase that lets you add your own credentials for S3, B2, etc. What’s the market size for users who will set this up themselves (versus going for a competing app that bundles the cloud storage), how many platforms will I have to develop for (Windows, Linux, Mac, iOS, Android?) and will they promise to never complain when an OS update or API change breaks the app?
      • 4y ago
• somenameforme 4y ago
  Large companies are growing to levels that are arguably unsustainable. When you have billions of dollars in baseline overhead costs, an amazing product may not even get you in the black. You'd need to do that every year, and likely multiple times per year. It's simply not realistic. So the solution these companies are choosing is rent seeking. I'd add that this issue is affecting many other industries as well. Entertainment being a visible one. Hollywood has big budgets, big overhead, yet increasingly difficulty finding the big ideas. So we get "Men in Spandex Save the World #83." AAA games are behaving similarly. There seems to be less of an effort than ever to even feign that "Next Big Shooter" is essentially last years next big shooter, reskinned. This is why I hold the certainly uncommon view that we are probably nearing 'peak big business', at least until the next great frontier emerges. It's difficult to imagine these increasingly widespread "solutions" being sustainable in the longrun. One issue, among many, is a tragedy of the commons with many solutions. Charging rent sounds great for the individual company, but the more companies that charge rent - the more intolerant consumers become of it. See how online streaming went from a golden goose to a bloodbath for everybody once "too many" companies got involved.
• cosmin_caruxell 4y ago
  1. Recurring revenue - revenue is repetitive, with, ideally, a low churn rate. 2. Revenue forecasting (being able to predict growth with higher precision than ever before, and also check out how fruitful your marketing campaigns are). 3. Flexibility. If users like your product (there's a real value that your product or service provides to them), they'll stick around. If not, they won't. 4. Profitability. The SaaS model tends to be a lot more profitable (especially in the long term).
• ineptech 4y ago
  Imagine a world in which most middle-class families have a cloud VM where they run server-side stuff (Mom's blog, Junior's minecraft server, etc), and when a software vendor sells you software with a client/server model, it's normal for them to deliver the server component as a container to run on your server. That's the world in which you can buy the software you described without SaaS. As long as the vendor is running the server side, you're paying by the month.
  • llanowarelves 4y ago
    Then there is stuff like Adobe Cloud, where it's forced on you, and you don't really use the cloud features anyway.
• jrockway 4y ago
  Providing software for users to host themselves is quite difficult. We do it at Pachyderm. Our software is basically data version control where you can incrementally process data as it's added (or your code changes). This is much more business-y than the use cases you list, but I can describe why it's tough even when your customers are compute platform teams. Pachyderm started off as a self-hosted offering, but we did try doing a fully-managed hosted solution, because it would be super easy for users to get started. You write some automation to make a perfect install in your preferred cloud environment, and then users click a button and have a perfectly configured, monitored, and backed up environment. If there's a problem, customer support can go play with the underlying resources (always with explicit user consent, of course; we were super strict about this), and that means that users get a solution instead of a fun debugging problem. Less surface for them to configure, less chance for configuration problems. Ultimately, this turned out to be unappealing to users, for many of the reasons that you list. People want to own their own data and not have to trust even the nicest and most competent people with it. For that reason, we doubled down on the self-hosted option. There are many pain points with self-hosting. From the start, it's difficult to offer something like a free trial. We'll give you the software for free (hey, it's open source), but you're on your own to find a computer to run it on. You'll need to setup DNS. You'll need to get a TLS certificate. For our software, you'll need to run Kubernetes. Before you can even see what value we offer, you have to do a lot of grunt work. What this means is pretty long sales cycles (while we assist you in navigating all those requests through your organization), and a dropoff among people that just want to have their problem solved today. (You can see this yourself. I bet you'll click any link on HN that sounds interesting. But if I just said "download and run this .exe", you'd probably be quite scared, and it would take some convincing. And rightfully so! That's the difference between SaaS and self-hosted, at the earliest possible phase, "do I even want this thing they make?") From a technical standpoint, the amount of work you have to do increases dramatically. We have to write code to talk to every variant of object storage. We have to provide configuration documentation and advice for 3+ cloud providers. (For example, we used to depend on etcd pretty heavily. etcd's performance is very heavily dependent on disk iops, and the standard storage classes in your average cloud provider's are woefully inadequate. So we have to get people's data from the inadequate storage to one that is fast enough, and that's just a lot of work.) We have to support customers' internal security initiatives. If you thought keeping up with changes to one cloud provider for one instance of your application was a lot of tedium, multiply that by 3 cloud providers, by ARM and AMD64, by 6 ingress controllers, by 5 Kubernetes versions, by Local SSD, networked SSD, spinning rust, by corporate-mandated HTTP proxies, etc. It is a ton of extra work to make software that fits the customer's environment over just making your own environment that is perfect for your software. Users dictate the upgrade cycle, not software engineers. I have worked on teams where every commit to master just gets deployed to production within 5 minutes. It's awesome. All you can do when you self-host is to make available another version; if users want it, they will upgrade it. Upgrades are always risky, especially when you wait a long time. So every release has to provide value worth the risk, or the same bug from 2 years ago will be reported again and again. Because of the risk, we have to maintain stable and testing release channels. Customers that want to try a new feature in their dev environment can get a nightly build with the latest features, but we still have to maintain a stable branch for customers that are happy with the featureset and just need security and bug fixes. We have to do work to lower their ops risk. This is honestly twice as much work as just pushing master to prod every so often. Backports cleanly apply most of the time, but when they don't, you're just implementing the same fix against slightly different code. It's work. (I'm a "if the tests pass, there are no known bugs in the code" kind of guy, so I've never been worried about deploying master to production. Obviously, some care in your software engineering is required and this doesn't work for many people, but it does work for me with a very good track record of uptime. None of that matters when you self-host, nobody would simply trust my assurance that the new version is good to upgrade to.) Even ignoring all of that, it's quite the change in how you as a software engineer operate. You can't reach out and touch the system, ever. You ship a build artifact, suggest that the customer install it, and wait for their feedback. If you need certain information to show health/non-health, you have to make that understandable to the operator (who is often different from the user, who has other health concerns). If you need to be able to debug something, you need to add code to your app to do everything that you would think of doing if you were debugging a live environment, and make the results understandable to the user. The tooling around this is pretty much the wild west. I recently investigated using Bazel to build our software, because we have three parts that are pretty much completely coupled to each other bidirectionally; Go, Typescript, and Python. There just isn't tooling around all of our requirements (we support both AMD64 and ARM deployments, as customers like those cheap ARM instances and developers like M1s without binfmt_misc hacks), because big tech companies that make these tools have the liberty to dictate their requirements. As a result, we spend a lot of time hacking together tools that meet our customers' requirements, but as a startup, don't have the resources to build something perfect, so developer experience honestly isn't as nice as, say, writing an internal app at Google. Finally, the hiring situation is complicated. Pretty much nobody is building software that users deploy themselves, so it takes a certain rare type of developer to be productive in this environment. Your code has to show its work; operators that didn't write the code will be running it in production, and your software has to lead them to a solution to their problems. (Even things like "my job ran out of memory" are hard to detect and convey to users and operators.) You can't just push a fix you think will work to prod to see if it fixes things; you have to reproduce the customer issue in your own environment and fully test it before your code goes into a release. It's slow going, and care is of the utmost importance. Code review has to be thorough; you need to understand your customers environment and ensure that a fix for one doesn't break some other. (Yes, we have tests for this sort of thing, but great care is the last line of defense against regressions.) It's not just software engineers; marketing types always want to run A/B tests, and customers don't want to be subjected to this sort of thing. We have to make the right decision in advance, we can't give 10% of users an experiment and see if they rage-unsubscribe over the change. All in all, it's a very different world. If you feel like your job isn't hard enough just running one instance of your software in an environment you control, selling your software for self-hosting is the job for you. It's hard. It's a slog. But, it's great for your users.
• tchock23 4y ago
  I have a software product that began with a traditional SaaS model before I realized that usage was project-driven/sporadic and it was better for the customer to do a pay-as-you-go model with no subscriptions. What happened after I made the switch away from subscriptions? I received a bunch of support questions asking for the subscription options back. People were truly confused/upset that hosted software wasn't being sold on a monthly or annual subscription basis - even though per-project was more flexible and cheaper for them. My takeaway is that - for better or worse - the SaaS subscription model is just so expected among buyers these days that to defy those expectations is just going to shoot yourself in the foot.
• dugmartin 4y ago
  For your two specific product questions: > 1) Personal photos and videos backup and viewer. - Just give me a cheap cloud for backup and a desktop app for viewing. It sounds like you want a one time purchase for backup that lasts forever? I'm not sure who is going to rationally offer that service as there are ongoing costs. > 2) Personal budget - Just give me a desktop app that connects to my different accounts and gives me overview. At least in the US that means you have to directly work with banks (ala Quicken), use a third party service (like Plaid) or maintain your own scraping system that perpetually breaks and/or violates the bank TOS. Any of those options is going to cost the software provider ongoing costs. Again nobody is going to take a one time payment and be liable for ongoing costs. I do think there is money to be made in the right industry for desktop apps that charge a decent amount ($100 and up) and offer 1 year of updates and then perpetual use with the final updated version for that year of use. This incentivizes the developer to maintain security updates and make feature additions so users are willing (but not required) to pay again in the future.
• yodon 4y ago
  Software is sold as SaaS for the same reason games are multiplayer. Both are driven by the need to stop your app from being pirated. The recurring revenue piece is just a side effect of adopting the only effective anti-piracy mechanism ever developed. If all the code runs on the user's laptop, it doesn't matter whether it's a game or a productivity app and it doesn't matter whether it's cheap or expensive, it will be cracked and it will be pirated. If a critical piece of the product runs on a server that you the business founder own, whether that's multiplayer lobbying or MMO sharding or some key part of your productivity app (like data storage or whatever), piracy ceases to be a crippling problem for your business and becomes a non-issue. You also have the opportunity to get a recurring revenue stream rather than a single payment, which is generally preferable for the business (and better aligned with the fact that you do now have monthly per-user costs because you're hosting part of the app on your servers). As a data point to back up the importance of piracy in the equation, look at the distribution of start dates for successful software companies. There were lots of successful software companies started in the 80's and early 90's, but almost no successful software companies were started between 1995 (when the first web browsers made piracy easy for the first time because you didn't have to physically know someone with a physical copy of the cracked software, you could download the crack from anyone anywhere) and 2006 (when Salesforce.com showed the world what the games industry had already figured out, which is that hosting part of your app on your own server is a great way to stop piracy and get recurring revenues). Once Salesforce.com showed the industry that "SaaS" works, all of a sudden people could start launching tons of profitable software companies again. Can you find a successful software company started during those dark ages of 1995-2006, of course you can, these are trends not absolutes. Was it far harder to be a software company in those dark days? Absolutely. That's why we have SaaS today and that's why SaaS is here to stay.
  • debevv 4y ago
    Has piracy really ever been a crippling problem for any business?
    • coryrc 4y ago
      Yes https://irdeto.com/news/game-piracy-results-in-over-21-million-in-lost-revenue-during-opening-release-window/ https://irdeto.com/news/game-piracy-results-in-over-21-milli...
• 0xbadc0de5 4y ago
  As others have said - recurring revenue models are easier to structure businesses around. It makes business planning and employing people easier. It also makes VC funding easier because the books are more consistent and easier to understand. It may or may not be what best serves the customer or represent consumer preferences, but it is (increasingly) how things are done in order for a business to compete (or exist).
• ss48 4y ago
  In many cases, it's easier to support. You control the hardware serving the application to your users. You have access to more information for troubleshooting issues your user may have. You can better predict how many paying users you will have and be able to allocate support staff more effectively. You can ensure more of your users are on the latest version of the application.
• phpthrowaway99 4y ago
  If people actually looked at what they were paying for MS Office over a decade they'd wonder wtf they were doing. Small numbers are easier to sell. Before a company spends $20k on a PM tool, they would discuss it to death. But signing up for $299 a month and giving it a shot is easier.
  • ozim 4y ago
    To add to "they would discuss it to death" - yeah now imagine you need to start a company and you have to shell out $300k up front for multiple software licenses.
• Garlef 4y ago
  Delivering the software is much easier: * Do you want to build it for mac? And windows? And linux desktop (lol)? And from the clients side, it's also easier: * You just need to open your browser you're good to go. * No need to install updates. Just imagine what kind of hassle rolling out updates for desktop software is in a company with more than a few employees. This used to be a dedicated job. And feature wise, it's also better: * Compare working with google sheets to excel files being sent around as email attachments.
• rvz 4y ago
  They slap anything they can find with a subscription because it is an easy way for them to rent seek and grift as much as they can. They don't want to admit that they are part of the griftopia that they are creating; especially building a SaSS on-top of something that does not need to be a SaSS or that can be done for free.
• ggregoire 4y ago
  Interesting that you chose the "JetBrains model" as example cause everyone I know who uses one or several JetBrains products uses cracked versions. I know like 10 developers who use their products and I don't think a single one of them paid for it. So I guess one of the advantages of the SaaS models is that you can't actually use the product without paying for it. And if you detect that an account is fraudulent (hacked account, account sharing, fake banking info, etc) or late in its payment, you can just temporarily or permanently disable it with a simple UPDATE query.
• Evan_Hellmuth 4y ago
  Better business model (definitely for business owner, arguably for customers)
• 0xbadcafebee 4y ago
  Besides the recurring revenue, SaaS is also a lock-in device, you can surveil your users to find new ways to make money off 'em, and many people are more apt to pay $10/month because they figure they can cancel it at any time. All of this is more attractive to venture capitalists than the JetBrains model.
• Mikeb85 4y ago
  ??? JetBrains definitely offers monthly plans, SaaS-style.
• enos_feedler 4y ago
  Everything is a SaaS product because that is what users want. That is the simplest answer. Innovation always comes back to the end user. If SaaS was not a business model innovational that the user wanted it would simply die out. Instead, it’s growing.
• dboreham 4y ago
  Because money
• xtracto 4y ago
  I just recently cancelled a $5 a month subscription to an Android App/website service for storing food recipes. I was subscribed for about 2 years to "support" the small developer, but really could not justify paying any monthly fee for a program... I replaced it with a self-hosted RecipeSage install.
• kaffee 4y ago
  Ben Thompson nails it, as usual: "The brilliance of paying on a subscription basis is that a company can buy exactly what it needs, when it needs it, and no more." From https://stratechery.com/2019/microsoft-slack-zoom-and-the-saas-opportunity/ https://stratechery.com/2019/microsoft-slack-zoom-and-the-sa... He's written about this in other posts too.
• bluedino 4y ago
  Because the MBA's decided they could make more money that way.
• d_t_w 4y ago
  We have modelled our company/product specifically on JetBrains. We're also bootstrapped, self-funded, etc. We build a tool for Apache Kafka (https://kpow.io https://kpow.io), it's not a SaaS product, it's a single docker container or JAR that runs in air-gapped environments, our users install it in their own network and it just runs. That's what we thought engineers wanted, and tbh it turns out we were right in plenty of cases. Our licensing is an annual subscription however - but then again so is JetBrains (well at least for the Intellij product that I happily pay ~$150 a year for). I think for us the recurring revenue is really important, we wouldn't be able to sell you a perpetual license as we have commercial costs that are ongoing and related to maintaining the quality of the product. Not only is it better for us commercially, but also we have only had one customer in the last three years request a perpetual license, and we we explained we don't offer that model they bought a subscription. So I completely agree on the non-SaaS JetBrains model, and I love that you mentioned that company. We often get asked about Confluent in our area of expertise but quite honestly from day 1 in 2018 we've been aiming to be the JetBrains of distributed systems. We even followed their dark branding style. Edit: Just to add one more bit of context now I think of it. Don't underestimate the power of the hive-mind. We have spent four years building a boostrapped non-SaaS product. We spend all our time talking to customers, shipping features, squashing bugs - living the dream basically. That's a really rare path to follow this decade. We've also had four years of often well-meaning people trying to intro us to low-information 'startup investors' or god-forbid another startup 'accelerator'. We stopped talking to all of them about two years ago, but for a while there we got told repeatedly to build a SaaS product. And the single worst piece of advice I've ever received which nearly made me puke, when we were in year one of our product and already had a reasonable number of users / clusters: "Just grab all their information and stick it in an S3 bucket, that information is what everyone wants! Number of clusters, users, version, etc - you can sell that!" Some people just don't understand that you can sell a tool that does something valuable without making your customer base some side product that you sell on the open market. It has been hard at times when we see startups raise tens of millions, but we're now in a position where we are miles out in front of the pack, have a rock-solid product, a great roadmap yet to go, and s stack of great customers who we respect. At no point would someone else's cash or terrible advice have left us in a better position - though we might have ended up with a SaaS product instead..
• togs 4y ago
  Capital in the 21st Century by Piketty claims the trend is labor -> capital in terms of power, I.e. labor becoming worthless, capital becoming more valuable. Makes sense then that software among other things becomes a service. Problem is same old conflict: I work for money, they own my work and take money, I resent that, they like it, then violence or legislation or something.
• Melatonic 4y ago
  It is all about money and ease of use. What you are describing is how the software model used to work - it is simply easier to outsource everything. But as you note, of course, this usually makes things more expensive. Cloud providers and software engineers have of course come up with tons of new tools to make this outsourcing (or you could also call it renting + outsourcing) cheaper (autoscaling being a huge one) and this incentivizes moving to SaaS or PaaS infrastructure. However as these new products mature companies are also realizing they can use those same innovations in their own "on prem" infrastructure. Most of the time it comes down to how big the company is (do they hit the threshold where hiring a bunch of people to run their own datacenter or machines makes sense) and is their business long term focuses enough that they care more about the big potential cost savings vs the advantage of (from an accounting perspective) recuring regular costs per quarter vs larger occasional purchases of hardware. Personally I think we are going to see a huge "private cloud" movement in a few years once the market matures and companies realize they did not need to give absolutely everything to AWS. I have always liked the hybrid cloud model and then using SaaS only for things that are a huge pain in the ass to manage (since with SaaS you are not just renting/outsourcing the hardware but also all of the software work as well). Email is a great example of this - its a huge PIA to manage yourself and often not that costly to just pay someone else to do it. In my opinion the holy grail for many companies is having their big "regular" workloads (especially stuff computationally expensive or requiring special hardware or large storages) run themselves on their own hardware + seamless integration with a cloud provider for autoscaling that process up as needed.
• pedalpete 4y ago
  Almost all the comments are focused on the "recurring revenue" from the side of the business. We're looking at subscription from the point of view of the customer in our start-up. We're in the neurotech/sleeptech business, and competitors (Dreem, Philips) were selling products for $500+, and we see other start-ups in the space apparently doing about the same. We're looking at a subscription cost because it lets us get into the hands of more customers, which means we can bring our production costs down, and everyone wins. Yes, our LTV, should we have churn right, will be more than the up-front cost, but as we say "I can't help somebody sleep if I can't get them to try the product". So please don't ONLY look at SaaS from the perspective of the business. For many businesses, it makes more sense from the consumer side as well.
• sangnoir 4y ago
  > Why don't we have more businesses following the JetBrains model specially if the product is not a service that needs to run 24/7. JetBrains would have gone the SaaS route if they could get away with it. Seven years ago, they made an announcement[1] to go pure-subscription/SaaS, and the outcry[2] was so massive, they reversed course over a matter of days,id memory serves. 1. They proposed licensing term changes included bricking your IDE the moment your subscription lapsed, switching from their previous terms where you'd be stuck on a working then-current release forever. 2. https://news.ycombinator.com/item?id=10170089 https://news.ycombinator.com/item?id=10170089
• phendrenad2 4y ago
  Software piracy. Why make something good when people will just torrent it? Far better to become a SaaS and accept all of the drawbacks and limitations that come with it.
• pqyzwbq 4y ago
  It is very hard to develop on premise product. First you need to works with different Linux OS (ubuntu, redhat, etc.), and nowadays, product may contain a lot of microservice, then you need a kubernetes cluster, which is very hard to maintain. And then, you need to find a good storage (object/blob storage) for kubernetes. Then, you may need to often troubleshooting server issues (like, disk full, slow disk issue, out of memory, kubernetes network broken). And you need to often check whether the data backup system works. It is much easier to operate as SaaS, and you can pick your OS and your machine spec, and your programing stacks
• Henrywright23 4y ago
  [dead]
• matiasfernandez 4y ago
  It's simpler than most people think. The Present Value of $10/month for 5 years is ~$450 at around 15% Discount Rate. For consumer software, many are not willing or able to invest that kind of money upfront.
• eternityforest 4y ago
  Companies make more money Consumers put up with it And devs like how it's friendly to major rewrites and tinkering. I use a lot of cloud stuff because there's no other choice. There's no P2P Tile or YoSmart. I'm not interested in hosting something as important as email myself when there are entire teams that focus on that full time. They kind of have the upper hand. What's the alternative to google docs? Does it involve maintaining a server or saying the words "Ok, just download this app and type in this IP address"? Open source and (Non-cryptocurrency) P2P is probably always going to be the best for this. Commercial software seems to have clearly decided that it wants to be SaSS. Maybe there's a niche market for non SaSS, but so many people who want local stuff are concerned with privacy, or have a very low budget, and prefer open source if it's available. Obsidian seems to be doing well as proprietary local first software. Now that SyncThing exists, it's a lot easier to develop and use this kind of thing.
• BerislavLopac 4y ago
  One important reason is the ease of delivery. If you're selling a desktop app you either need to build for different platforms (like JetBrains do), or limit yourself to a single platform (as attested by the many MacOS-only or Windows-only tools). Additionally, you need to support mechanisms for remote updates, and even with that there are many customers who fail to update for various reasons, so you need to support old versions. With SaaS, you have full control over your product, at the cost of being limited to the in-browser (and mobile) front-end. Your backend can be written in any technology you want, and you can release new updates with any cadence you want, even continuously. And you can even replace the whole backend overnight, with your users being none the wiser (assuming it has full feature parity with the old one).
• TradingPlaces 4y ago
  Because gross margin is obscenely high and investors like that.