Service as a Commodity - SaaC
Dennis has done some great coalface work with a grown up mashup of Blinksale/Freshbooks + Basecamp. I know how time consuming and tricky doing these things is for the first time, so hats of to D for leading the way for the rest of us. I won't cover the specifics as D does this justice himself, what I want to riff on is the service cost issues that D brings to the table both in this post and in a later post SaaS pricing and integration .
One of the reasons for the apparent discrepancies in pricing between services themselves and their derivation when aggregated or combined, is that none of them have really had exposure to the normal market pricing pressures. Although each service vendor may have (in isolation only) examined the market for competitive products to determine pricing (or calculated it in some fashion if they were the first), any such pricing would probably not have been envisaged in a combined or aggregated situation. This is could be due to a simple short sightedness or even 'it wasn't our problem'.
Having 'menu' of services pricing is fairly simple - 4 prices means 4 options, but add in another service with it's own 4 prices and now you have 4 x 4 options, add in further services and.. well you get the idea. This results in complex and non-transparent pricing the more you combine services, it also leans toward the higher cost packages as they include the required mashup features. Basically the pricing being offered is not designed for mashing up services. For mashups you need either a simple single mashup price or even better still, a low cost usage rate i.e. pay as you go pricing like S3 or telephone call charges based on fractional usage/bandwidth etc..
The good thing about utility pricing is that it can be related directly back to actual operating costs, this leads to a more realistic pricing model and would be likely to result in Fairer market pricing.
Although Dennis and I have clashed before over dedicated vs mashed-up winning in business moving forward, the near term reality is a mixture of both. I do, however, favour mashed-up services winning in the longer run, as I think they will help provide a dynamic model that fills all the gaps economically. All of the basic components will emerge to cover the diverse requirements of more or less all businesses in future. Specialist providers will emerge filling these component (opportunity) gaps, rather than single entities dominating with wide-ranging complex service offerings. I see this as RISC vs CISC all over again, and I think RISC will emerge as the the most economical and follow natural market selection.
I would also point out that many of the current service costs are false and probably very high compared to the true market value. If you want an example of good value service provision look at Google with their web apps for domains (WAD?). GoolgeWAD represents very excellent value :
Dennis and I have clashed before about whether mashed-up or or dedicated services will emerge to dominate business infrastructure in the future. In the near term of course both will coexist, in the longer term I expect services to modularise allowing solutions to be customised and mashed-up to fit virtually all business requirements. I also believe that as this happens pricing will fall and eventually take on a utility model based upon actual usage. Businesses will emerge as specialist service providers offering high quality components rather than complete online applications, this is what I expect to enable the complete commoditisation and modularisation of business services. We may also see the emergence of middle tiers, integrating between the service providers and the service consumers. These new integrators will be very different from their historical cousins as they will emerge in a disruptive fashion with completely new Modus operandi.
I guess what I am saying here is that what Dennis and others including ourselves are experiencing is the roar of that service surf as it raises up behind us ready to crash onto the vendor beaches across the globe.
What do you think, am I barking up the wrong tree, is Dennis expecting to much for his money or are we both off our meds today ?
One of the reasons for the apparent discrepancies in pricing between services themselves and their derivation when aggregated or combined, is that none of them have really had exposure to the normal market pricing pressures. Although each service vendor may have (in isolation only) examined the market for competitive products to determine pricing (or calculated it in some fashion if they were the first), any such pricing would probably not have been envisaged in a combined or aggregated situation. This is could be due to a simple short sightedness or even 'it wasn't our problem'.
Having 'menu' of services pricing is fairly simple - 4 prices means 4 options, but add in another service with it's own 4 prices and now you have 4 x 4 options, add in further services and.. well you get the idea. This results in complex and non-transparent pricing the more you combine services, it also leans toward the higher cost packages as they include the required mashup features. Basically the pricing being offered is not designed for mashing up services. For mashups you need either a simple single mashup price or even better still, a low cost usage rate i.e. pay as you go pricing like S3 or telephone call charges based on fractional usage/bandwidth etc..
The good thing about utility pricing is that it can be related directly back to actual operating costs, this leads to a more realistic pricing model and would be likely to result in Fairer market pricing.
Although Dennis and I have clashed before over dedicated vs mashed-up winning in business moving forward, the near term reality is a mixture of both. I do, however, favour mashed-up services winning in the longer run, as I think they will help provide a dynamic model that fills all the gaps economically. All of the basic components will emerge to cover the diverse requirements of more or less all businesses in future. Specialist providers will emerge filling these component (opportunity) gaps, rather than single entities dominating with wide-ranging complex service offerings. I see this as RISC vs CISC all over again, and I think RISC will emerge as the the most economical and follow natural market selection.
I would also point out that many of the current service costs are false and probably very high compared to the true market value. If you want an example of good value service provision look at Google with their web apps for domains (WAD?). GoolgeWAD represents very excellent value :
- Gmail - for email
- Gcal - for shared calendars
- Star pages + Homepage - for dashboard/web pages
- Docs - for wordprocessing (and blog/page editing)
- Spreadsheets - for spreadsheets and finacial collaboration
- GChat - for IM
- GTalk - for VOIP
- Page creator - for creating web pages etc..
Dennis and I have clashed before about whether mashed-up or or dedicated services will emerge to dominate business infrastructure in the future. In the near term of course both will coexist, in the longer term I expect services to modularise allowing solutions to be customised and mashed-up to fit virtually all business requirements. I also believe that as this happens pricing will fall and eventually take on a utility model based upon actual usage. Businesses will emerge as specialist service providers offering high quality components rather than complete online applications, this is what I expect to enable the complete commoditisation and modularisation of business services. We may also see the emergence of middle tiers, integrating between the service providers and the service consumers. These new integrators will be very different from their historical cousins as they will emerge in a disruptive fashion with completely new Modus operandi.
I guess what I am saying here is that what Dennis and others including ourselves are experiencing is the roar of that service surf as it raises up behind us ready to crash onto the vendor beaches across the globe.
What do you think, am I barking up the wrong tree, is Dennis expecting to much for his money or are we both off our meds today ?