jeffreyrogers
12 hours ago
If there are all these companies using all this unnecessary software that "sucks" then wouldn't there be a huge competitive advantage to being the CEO who said, "hey, we can get rid of all our expensive SaaS, free up a bunch of cash for productive investments, and make a bunch more money"?
I agree that a lot of the AI stuff will fizzle out and be wasteful in retrospect, but that doesn't mean that companies are foolishly paying for SaaS they don't need or that the whole ecosystem is a bubble. I think most companies are run a lot better than the author believes, and if they're not then there's a huge opportunity for a more efficient competitor to come in and steal the market.
advael
12 hours ago
That would be true if this was a market where funding mostly came from making products and generating revenue
It isn't. The majority of tech companies are speculative and funded by venture capital, and what's worse, many of the largest companies, which actually do generate revenue, are monopolies
What this means is that efficiently competing is only a viable strategy if you can convince a small pool of potential investors - many of whom think "competition is for losers" - that it's a good play, while also avoiding being bought out and crushed by one of a few trillion-dollar companies
The dynamics you're describing are those of an open market, and with wealth disparity at an all-time high (so your customers have less influence on average) and financial scams fairly rampant due to decades of lax enforcement, most companies right now are not effectively operating in an open market
Buying SaaS is trendy conventional wisdom. It has benefits and downsides, but in my experience the biggest benefit is that VCs think it's smart to do and also often benefit from a company buying the products of other companies. Whether it helps with things like making products faster or better overall is close to immaterial in this environment
dbspin
12 hours ago
Not sure why this is being downvoted - anyone who has worked at a venture backed startup will find at least aspects of your argument to match their experience.
The game at companies that have achieved high valuations prior to IPO is to get to IPO or be acquired. To grow toward market dominance in their sector or to threaten an existing player while being cheaper to purchase than to duplicate rapidly.
Having worked at one such rapidly growing 'unicorn' myself, every decision made by senior management was made in order to please investors. Competition, our tech stack, even the product itself were basically irrelevant. What mattered was how the investors perceived the company - i.e.: how much we resembled the kind of company that they saw as likely to recoup 1000X.
This resulted in very strange cargo cult behaviour. Fo example my whole department existed to replicate a similar department in our major competitor. Incidentally that department has since been liquidated and replaced with a variety of off the shelf AI solutions. Our customers had little interest in the 'value' we created in any case.
We also purchased just about every SAAS solution imaginable. Because that's what shiny highly capitalised startups do. Our onboarding included two full weeks of 'interactive' videos, with tests.
It wasn't just SAAS either - everything we did was performative. Including custom outfitting a carbunkle office in a landmark building on the most expensive street of our country's capital.
The founders weren't eccentric nineteen year olds and our product wasn't some crypto scam or half baked AI offering, although it was itself a service. The founders' behaviour made complete rational sense. They were optimising to appear successful to the investors whose valuations made them appear successful to other investors. They used these investments to 'build a runway' for the tech industry contraction that was obviously coming, but also to gobble up every other similar company in their sector. I believe the industry we operated in is now essentially a duopoly, with EU level data protection regulations being the moat that prevents it from becoming a monopoly.
advael
12 hours ago
I think there's an explicit rule on hn against metacommentary on voting, but it can be a useful signal of the vibes within the community as a whole, and I do think that critically examining the VC model of tech startups kind of edges close to the sacred cows of this particular community (it is a public forum, but it's also ycombinator). But even if you're not bought into that particular organization's messaging, I do sympathize with not wanting to feel like your life's work is executing a bunch of cargo-cult behaviors to keep some investors who make all the real decisions happy with you. While I do think what I said was based on my best attempt at a sober assessment of reality, a synthesis of my own direct experience and the described experience of friends and colleagues and glances at the overall landscape from broad reporting done by various sources, it's a really bitter and painful thing to understand
cybrexalpha
10 hours ago
> wouldn't there be a huge competitive advantage to being the CEO who said, "hey, we can get rid of all our expensive SaaS, free up a bunch of cash for productive investments, and make a bunch more money"?
Unfortunately, this isn't how large org CEO compensation works. CEOs of large publicly traded companies are mostly compensated by the stock price. Either directly as it increases the value of their significant stock grants, or indirectly as their cash bonuses are tied to stock performance. Stock performance is mostly a result of quarterly financial performance. Therefore, directives that take a long period of investment are much less attractive.
Say you were the CEO of a multi-thousand person organisation. Your SaaS bill is through the roof, and so you want to in-house everything. Not only do you need to disrupt nearly every employee by changing the way they work (depending on what you're replacing), you need to enter into co-location contracts, buy hardware, and hire staff to mange that hardware. It's a very large up-front cost (likely in the tens of millions on hardware alone) that in theory will pay off in the long term, but investors and the market will see a spike in your assets on your P&L, and will question why you're tying up capital in hardware instead of building the stuff that you sell. That's assuming you have the cashflow to buy all that hardware in the first place.
jeffreyrogers
9 hours ago
That was my point. If it were that much cheaper to in-house everything or if there were cheap SaaS alternatives that worked as well, companies would switch to them. Companies are paying for SaaS because it solves a business need, and for the most part SaaS does it pretty well.
cybrexalpha
7 hours ago
In the long run, in many cases, it probably would be cheaper. It's just that the incentive structures between the long-term health and executives are not aligned .
marcosdumay
11 hours ago
Hum... Save some money for the shareholders, or keep personally going into that vendor-paid luxurious retreat twice an year?
Hard choice.
fatbird
11 hours ago
there's a saying in Marketing: "I know half my advertising dollars are wasted, I just don't know which half."
It's not that SaaS products don't offer some value, it's that they offer a nebulous, hard-to-quantify value, and when the CEO says "Can we ditch Salesforce?" the immediate response is "how will we track client relations then?" And while you can imagine a much more lean, custom-fitting CRM costing a lot less for the company, it's hard to imagine them finding it, either as a different SaaS offering or an internally developed project.
A big part of SaaS stickiness is organizational intertia.