How we’re spending $55,930.08 a year on SaaS products(blog.sawhorsemedia.com) |
How we’re spending $55,930.08 a year on SaaS products(blog.sawhorsemedia.com) |
Services whose cost is f(team size): CircleCI, Trello, Github
Services whose cost is f(user base): MixPanel, Moz, Shopify
I mention this distinction because the f(team size) services generally offer solid value to any team, being useful and less expensive than paying someone to build the same thing in-house. OTOH the f(user base) products are a lot harder for consumer apps to justify than business apps. They do occasionally offer enterprisey premium features like platinum support, but the main pricing scheme is based on X whatever's per month, and a SaaS company charging lawyers $100/user/month is a lot more likely to afford it than a casual gaming website with a million users and a some ads.
There's always a build vs. buy decision and sometimes you should build, but this is why even huge companies use Salesforce over maintaining an internal CRM.
Building something in-house probably doesn't usually result in a better product up front (and definitely not for less up-front expenditure), but it can reduce some risks and be less constraining to future moves if you own the app.
Github Enterprise is f(team size)
CircleCI is also f(usage), you can decide to have less capacity. (Although, in the case of CircleCI, more developers hopefully maps to more tests, so indirectly, it is f(team size))
Likewise, your CircleCI bill is going to be higher with more team members as you mention.
That's all very imprecise, it's not like there will be a direct linear relationship. But close enough compared to Mixpanel etc which scale with f(users) or f(transactions).
True, but I wonder how much of an employee's time it takes to manage dealing with all these suppliers, technology integration time with each of them, and changing how these services are used each time a supplier changes its product offering.
actually....
But if you already have an in-house engineering team who is reasonably competent at maintaining services, the tradeoff is probably different.
The tier of MailChimp they use implies their list is in excess of 110,000 subscribers, and since I do a lot of email marketing for my company, I can guess their open rate is probably somewhere in the 10-20% range, so they are throwing money away on emails that go to spam boxes or never get opened/engaged.
They use a 3rd party team chat service instead of hosting their own local XMPP service (this is a non-critical service I would wager, and could afford some downtime if the server needed maintenance).
All in all, they are spending a lot on things that aren't really necessary. They could bring some of those things in-house and probably save a lot per year as well (low-critical things that would require minimal maintenance).
This is not even mentioning the lack of flexibility they get locked into by using only 3rd party solutions. I've seen this at my company for the few external things we do depend on -- you end up building business practices around the 3rd party service, which may or may not be optimal or how you would normally do things. Having that flexibility, and assurance that service X doesn't go away tomorrow really can improve work-flows and peace of mind.
Seems their business is based entirely around other 3rd parties ... something that would make my company very nervous to say the least.
I would definitely use a service like that, both personally and professionally. The number of subscriptions I have is growing, and it's frustrating to keep up with all of them. I would love to have them all in one accessible place.
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If anyone is interested to chat about this some more, email is in my profile!
That's 20k upfront investment _before anyone has used it_. And this is where the real value of SaaS lies.
If I throw away 1000 EUR in seat licensing just for finding out a system seemed nice but doesn't work in the long run, I just saved 19000 EUR.
You can buy Atlassian Stash, once, for $1800/25 users, and use it forever: https://www.atlassian.com/software/stash/pricing
Even so I don't think there's any engineer we could hire for $60k salary (or any salary for that matter) who could effectively maintain all of the functionality we get from these products, but if you know of one please send them our way! http://sawhorsemedia.com/jobs/
I've been involved in this side of a startup 3 different times over a couple decades: IT systems are not a full time job for a startup. They're not even a part time job. They're an every-once-in-a-while type job. At <30 people, all you need is one engineer that can also run a single small internal server. Just one.
i interesting to see what breaks the 99 barrier
I'm quite sure that for a lot, if not majority of the packages you pay for, there is a perfect open source, free to use alternatives. Which might require just as much time to integrate as it's paid alternative, but you will have full control, self hosted.
Also consider the impact of the information you are sharing with all these third parties. Might be a bigger concern then currently estimated.
Example, the dead man's snitch, it kind of leaks every time a cronjob runs/fails.
And even if they could do it all in-house, that's a developer who's not working on the stuff that makes their product distinctive. Running your own email sending / file sharing / customer support tracking / project management / sales lead management software has a massive opportunity cost.
Plus that you are not making any third party aware of anything, as you don't need them. And might save you a lot of hassle in the middle of the night and you need vendor support, which generally at such hours could generate even more cost.
In my humble opinion, technical pov, the more you do in-house, and the less you rely on third parties, the more freedom the company has.
Also any in-house developed product, could be sold, generating income. Also, i believe, that developing your own, gives you a certain knowledge which you don't get if you are simply adopting third party software.
It's of course way easier/more clear to calculate ROI when you spending specific amounts instead of investing in knowledge, control and self power. The returns on that can very a lot.
But, generally speaking, things are only 'expensive' if you think they are not worth it.
Actually that's one point where you are not correct. For a good email campaign, it's imperative that you manage your list. You need to be looking at stats from the previous campaigns and making changes for future campaigns. If you have a lot of low-engaged/no-engaged emails, you need to try to re-engage them and/or drop them from your list. If you send 1 email a week to an address for 5 years that never opens, you are literally throwing money away. MailChimp (which we use too) has a lot of very good tools to help prune your list and glean a lot of insights into your engagement rates.
> Paying someone to micromanage the services to get cost savings would cost at least $60,000
Not necessarily. Download a copy of Openfire XMPP server, stick it on one of your spare windows/*nix boxes in the corner, and it will run un-maintained for years. Just cron/schedule the OS updates automatically and it takes no more effort/skill than logging into a website to manage user accounts.
And nobody says they need an expensive seasoned SysAdmin to manage these services. Hire a college student for $15-$18 per hour part time to come in and tidy things up.
There are other opportunities to be had with their list of services, such as taking advantage of the drastically lower cost BitBucket (if they must have their source code repo's external).
There's certainly a lot of waste listed here.
I would question that hosting in-house would be cheaper. As stated in other threads: that's less then the cost of an employee qualified to run all those services.
Also, with GH, I can always choose to take a project off GH and archive it. That wouldn't make sense if it were user-billed.
I was going to reply this to a different guy, but in my experience the risks of the in-house app going out of maintenance due to dev attrition or whatever are far lower than most people think. Stuff that's business critical is almost always staffed appropriately, and stuff that people perceive as business critical but actually isn't is usually the [large group of small apps] that aren't well supported. The big problem is the rinky dink Excel macros, VBA/COM+ add-ins, and random isolate single developer crap that nobody knows about except the end users.
However for some, the task of self-hosting is daunting. I presume that is why some are willing to pay a lot for a hosted solution.
BTW -- It's worth noting -- BitBucket is run by Atlassian and allows unlimited free private repos. I think you must pay for teams (EDIT: Free up to 5 users, $10 per month for 10 users, etc, it's basically $1 per user per month over the initial 5 free), but just throwing that out there. It's basically their hosted Stash solution.
Not saying Stash is bad (the contrary), but when evaluating cost, evaluate all cost.
Local installations don't cost hours-a-month to run.
Soon enough he or she will have to maintain your mail server, CRM, file server, bug tracker, CI service, backup services etc. and woops, your developer is now a sysadmin.
These systems largely run themselves, indefinitely.
Its mind-boggling how many accounts I still have for companies I don't work for anymore.
In fact, it's the sensitive data that is the issue that will generate the most resistance from potential customers. Companies probably care way less about trusting you with their credit cards than they do with trusting you with sensitive vertical-specific data. THEN AGAIN, people are putting their entire company communication into Slack so who really knows...
There's 2 sides to this business -- the technical/development side, and the business side. The business side should very much care about not wasting money unnecessarily, even during the good times.
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But it's not just about saving money -- the company has almost zero flexibility when using all 3rd party solutions. If a vendor pushes an update tomorrow and it radically changes the product and causes a large disruption (it happens), or a vendor goes under tomorrow, or [insert dooms-day scenario here], the company will be left scrambling.
Using 3rd party services also forces the company to build business routines/practices around their current inflexible environment -- so if they do have to switch vendors at some point, they will have to likely reinvent business routines/practices too. For some companies/services, that is not a problem -- for others, well, some companies have gone under during major core software changes (imagine your warehouse management system having to change suddenly and unexpectedly).
Just like software engineers try to minimize external dependencies unless the dependency is absolutely necessary -- businesses should too.
How many businesses have you run?
