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This is very circular -- yes, that's true.. and because it was so difficult everyone, vendor and customer alike, moved towards SaaS hosted offerings. There has

This is very circular -- yes, that's true.. and because it was so difficult everyone, vendor and customer alike, moved towards SaaS hosted offerings. There has to be a name for this argument-type: A leads to B, and those who seem to know only B start arguing for A because they don't remember why A lead to B in the first place. I see this all over the place.

rurp 3y ago
I don't know that the shift was about difficulty, at least not primarily. As best I can tell it's more about profit, and companies usually move to SaaS because it makes them more money and the other pluses and minuses are less important to them. I know as a consumer I'm much more reluctant to buy a new subscription product than I am to make a single purchase, but the options get less and less every year.
- nlavezzo 3y ago
  This is exactly it. On-prem deals were generally large perpetual license fees based on some quantity of software installed, and then a % of that as an annual "maintenance" fee which would provide access to support and software updates. The problem was that the maintenance revenue was valued at a much higher multiple by investors than their Perpetual Licensing revenue because it was recurring. Cue the thought... "What if the whole thing was recurring?"..."Hmm how could we justify that?"..."We make it a SERVICE that WE host!"... and then here we are now where if you want to actually own software, chances are you're out of luck.
  - browningstreet 3y ago
    It can also be how difficult it is to support on-premise software installations especially when customers use leverage to keep from updating to recent releases that had bug and security fixes, etc… I ran a SaaS and PaaS for fintechs and we had annual events where we had to hard negotiate with customers who didn’t want to incur the employee training burden for upgrading to newer releases with new features etc. Instead of accepting the rolling releases they would do one or two updates/year and we would stand up monolithic support programs to accommodate them. Moving away from this customer model was about headaches and release/support debt. There are a lot of challenges with complex on-perm solutions that hosting-for-customers can alleviate. Staffing for every customer hosting variation gets unduly complicated — and impossible — very quickly.
rufus_foreman 3y ago
>> because it was so difficult everyone, vendor and customer alike, moved towards SaaS hosted offerings I actually remember why one company I worked for moved from on-premise to SaaS. They told us that the market valued recurring software revenue at a higher multiple than it did one-time software revenue. On-prem was a large one-time sale and a small recurring support contract. SaaS was almost all recurring revenue. On the customer side, it is capital expenses vs. operating expenses.
strken 3y ago
I think it's also about changing expectations and environment. Big customers expect timely updates for the purposes of security, keeping third party integrations working, and bugfixing. They also expect high uptime and prompt outage mitigation. That's really hard to square with on-premise offerings. Don't get me wrong, it's also hard, but providing on-premise software is less difficult than it used to be in absolute terms. The main things that changed are SaaS driving expectations up, and needing to upgrade faster.

rurp 3y ago

I don't know that the shift was about difficulty, at least not primarily. As best I can tell it's more about profit, and companies usually move to SaaS because it makes them more money and the other pluses and minuses are less important to them. I know as a consumer I'm much more reluctant to buy a new subscription product than I am to make a single purchase, but the options get less and less every year.

nlavezzo 3y ago
This is exactly it. On-prem deals were generally large perpetual license fees based on some quantity of software installed, and then a % of that as an annual "maintenance" fee which would provide access to support and software updates. The problem was that the maintenance revenue was valued at a much higher multiple by investors than their Perpetual Licensing revenue because it was recurring. Cue the thought... "What if the whole thing was recurring?"..."Hmm how could we justify that?"..."We make it a SERVICE that WE host!"... and then here we are now where if you want to actually own software, chances are you're out of luck.
- browningstreet 3y ago
  It can also be how difficult it is to support on-premise software installations especially when customers use leverage to keep from updating to recent releases that had bug and security fixes, etc… I ran a SaaS and PaaS for fintechs and we had annual events where we had to hard negotiate with customers who didn’t want to incur the employee training burden for upgrading to newer releases with new features etc. Instead of accepting the rolling releases they would do one or two updates/year and we would stand up monolithic support programs to accommodate them. Moving away from this customer model was about headaches and release/support debt. There are a lot of challenges with complex on-perm solutions that hosting-for-customers can alleviate. Staffing for every customer hosting variation gets unduly complicated — and impossible — very quickly.

rufus_foreman 3y ago

>> because it was so difficult everyone, vendor and customer alike, moved towards SaaS hosted offerings I actually remember why one company I worked for moved from on-premise to SaaS. They told us that the market valued recurring software revenue at a higher multiple than it did one-time software revenue. On-prem was a large one-time sale and a small recurring support contract. SaaS was almost all recurring revenue. On the customer side, it is capital expenses vs. operating expenses.

strken 3y ago

I think it's also about changing expectations and environment. Big customers expect timely updates for the purposes of security, keeping third party integrations working, and bugfixing. They also expect high uptime and prompt outage mitigation. That's really hard to square with on-premise offerings. Don't get me wrong, it's also hard, but providing on-premise software is less difficult than it used to be in absolute terms. The main things that changed are SaaS driving expectations up, and needing to upgrade faster.