4 ms·

The issue is you can't use the "I'll give you a deeper discount for a 3 year contract" line anymore. It'll potentially create a situation where customers in th

by arnon 1y ago

The issue is you can't use the "I'll give you a deeper discount for a 3 year contract" line anymore. It'll potentially create a situation where customers in the US pay a lot less because they still have that incentive.

deadbabe 1y ago
I think you could still do it but it would involve some clever financial engineering.
- jolmg 1y ago
  Prepaid annual (or 3-year) contract. No refund once period started. I think that's how it's generally been. I don't see how this changes things.
  - StopDisinfo910 1y ago
    I don't know how the law is framed but generally no refund is illegal because it would be too easy to create loopholes in the law otherwise. What's customary is forfeiting any discount, then a partial refund with eventual early termination processing fees. So if you had an annual subscription with a 10% discount which you stop after 3 months, your refund would be what you have paid minus three months at full price plus a token processing fee. It's a very common setup for mobile phone and internet subscriptions here. You generally end up paying roughly the equivalent of one additional month when you cancel which competing providers often actually refund when you switch.
    - mytailorisrich 1y ago
      No refund is perfectly legal. Just continue to offer the service/product, i.e. cancellation only takes effect at end of term as was contractually agreed.
      - deleted 1y ago
        [deleted]
- dh2022 1y ago
  Someone will have to take the risk that the customer will walk away from the deal. Insurance companies maybe would pool different customers in some insurance pool? An alternative would be to ask the customer to pay in advance for 3 years. This way both the customer and the producer have an incentive to keep this deal going (if the producer reneges on the deal the consumer can take the producer to court. My reading implies only the consumer can walk away with 2 months notice). But in the world of 6% interest rates who would want to front that much money?
- petesergeant 1y ago
  20 years or so ago a gym made me take out a loan from them to pay for a year’s contract in advance, presumably for exactly this reason.
kranke155 1y ago
Prepaid contract. This is a false issue.
- dh2022 1y ago
  In the world of 6% interest rates it is expensive to pre-pay. So definitely an issue. Prepaying also takes away some of cloud computing's financial flexibility .
- some_random 1y ago
  Most enterprises don't want to prepay, especially if they can't categorize the spend in an efficient way (ie as CAPEX)
phkahler 1y ago
>> The issue is you can't use the "I'll give you a deeper discount for a 3 year contract" line anymore. I don't see why not. You can still offer a low price right? You can still promise it won't go up for 3 years. But the customer can now cancel at any time.
- dh2022 1y ago
  Well, if you bought hardware to support that client for 3 years and the client changes their mind 2 months later then you are stuck with this hardware....
  - deleted 1y ago
    [deleted]
  - papercrane 1y ago
    The Data Act allows for termination penalties in cases like that. You just have to make sure they're clearly disclosed in the contract.
- some_random 1y ago
  You can, but the thing that you get as a SaaS company in exchange for that 3 year discount is the certainty that you'd have a customer for 3 years. There is no longer an incentive to offer the discount.
  - bilekas 1y ago
    But there is once you remain competitive, if the reason for people staying on your platform is because they're locked in for 3 years then you're not offering a good enough service as others. This opens the market to competition who will offer better services or prices. The free market at work.
    - some_random 1y ago
      First off, we all know that unfortunately just offering the best product is not enough to guarantee that a customer will pick you and stay with you. Secondly, because of the use of ARR as a key metric that lock in has an extra benefit to the SaaS provider in dealing with investors.
jdietrich 1y ago
>Nothing in this Regulation prevents a customer from compensating third-party entities for support in the migration process or parties from agreeing on contracts for data processing services of a fixed duration, including proportionate early termination penalties to cover the early termination of such contracts, in accordance with Union or national law. https://eur-lex.europa.eu/eli/reg/2023/2854/oj/eng https://eur-lex.europa.eu/eli/reg/2023/2854/oj/eng
- spwa4 1y ago
  That's true. If you have a business deal that immediately creates a loan when a customer registers, you can make this early termination cost whatever you want, you could even make it more than the remaining value of the contract.
mehdibl 1y ago
Such discounts are prepaid, or you give free period after paying in full for 70% of the period. Also there is prepayment in a lot of commitment. When you commit on the cloud such contract your PREPAY compute unit and this is not new.

by arnon 1y ago

deadbabe 1y ago

I think you could still do it but it would involve some clever financial engineering.

jolmg 1y ago
Prepaid annual (or 3-year) contract. No refund once period started. I think that's how it's generally been. I don't see how this changes things.
- StopDisinfo910 1y ago
  I don't know how the law is framed but generally no refund is illegal because it would be too easy to create loopholes in the law otherwise. What's customary is forfeiting any discount, then a partial refund with eventual early termination processing fees. So if you had an annual subscription with a 10% discount which you stop after 3 months, your refund would be what you have paid minus three months at full price plus a token processing fee. It's a very common setup for mobile phone and internet subscriptions here. You generally end up paying roughly the equivalent of one additional month when you cancel which competing providers often actually refund when you switch.
  - mytailorisrich 1y ago
    No refund is perfectly legal. Just continue to offer the service/product, i.e. cancellation only takes effect at end of term as was contractually agreed.
    - deleted 1y ago
      [deleted]
dh2022 1y ago
Someone will have to take the risk that the customer will walk away from the deal. Insurance companies maybe would pool different customers in some insurance pool? An alternative would be to ask the customer to pay in advance for 3 years. This way both the customer and the producer have an incentive to keep this deal going (if the producer reneges on the deal the consumer can take the producer to court. My reading implies only the consumer can walk away with 2 months notice). But in the world of 6% interest rates who would want to front that much money?
petesergeant 1y ago
20 years or so ago a gym made me take out a loan from them to pay for a year’s contract in advance, presumably for exactly this reason.

kranke155 1y ago

Prepaid contract. This is a false issue.

dh2022 1y ago
In the world of 6% interest rates it is expensive to pre-pay. So definitely an issue. Prepaying also takes away some of cloud computing's financial flexibility .
some_random 1y ago
Most enterprises don't want to prepay, especially if they can't categorize the spend in an efficient way (ie as CAPEX)

phkahler 1y ago

>> The issue is you can't use the "I'll give you a deeper discount for a 3 year contract" line anymore. I don't see why not. You can still offer a low price right? You can still promise it won't go up for 3 years. But the customer can now cancel at any time.

dh2022 1y ago
Well, if you bought hardware to support that client for 3 years and the client changes their mind 2 months later then you are stuck with this hardware....
- deleted 1y ago
  [deleted]
- papercrane 1y ago
  The Data Act allows for termination penalties in cases like that. You just have to make sure they're clearly disclosed in the contract.
some_random 1y ago
You can, but the thing that you get as a SaaS company in exchange for that 3 year discount is the certainty that you'd have a customer for 3 years. There is no longer an incentive to offer the discount.
- bilekas 1y ago
  But there is once you remain competitive, if the reason for people staying on your platform is because they're locked in for 3 years then you're not offering a good enough service as others. This opens the market to competition who will offer better services or prices. The free market at work.
  - some_random 1y ago
    First off, we all know that unfortunately just offering the best product is not enough to guarantee that a customer will pick you and stay with you. Secondly, because of the use of ARR as a key metric that lock in has an extra benefit to the SaaS provider in dealing with investors.

jdietrich 1y ago

>Nothing in this Regulation prevents a customer from compensating third-party entities for support in the migration process or parties from agreeing on contracts for data processing services of a fixed duration, including proportionate early termination penalties to cover the early termination of such contracts, in accordance with Union or national law. https://eur-lex.europa.eu/eli/reg/2023/2854/oj/eng https://eur-lex.europa.eu/eli/reg/2023/2854/oj/eng

spwa4 1y ago
That's true. If you have a business deal that immediately creates a loan when a customer registers, you can make this early termination cost whatever you want, you could even make it more than the remaining value of the contract.

mehdibl 1y ago

Such discounts are prepaid, or you give free period after paying in full for 70% of the period. Also there is prepayment in a lot of commitment. When you commit on the cloud such contract your PREPAY compute unit and this is not new.