How we’re spending $55,930.08 a year on SaaS products
blog.sawhorsemedia.comIt's significant this is a SaaS company using these services. Some of the services have a cost based on team size, while others have a cost based on user base (and usage volume).
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.
And this is precisely why many large enterprises build things in house rather than license commercial tools. It's a lot more palatable to buy 3-5 full time developers to build and support and internal helpdesk than license ServiceNow, etc, for tens of thousands of users.
There are risks to building in house too: Things will break over time Key programmer leaves, no good documentation or succession plan left behind New needs will arise (e.g. if you built an expense tracking app before smartphones, you'll now need to build a iPhone/Android app) Maintaining security - is your security team really better than the outsourced service's? API support Developer ecosystem
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.
There's also considerable risk-aversion at large enterprises. Getting themselves into a position of significant dependence on a SaaS provider can be unappealing for at least two reasons, even if the pricing works for them initially: 1. risk that the pricing gets raised significantly, or the business's employee/customer profile changes in a way that raises the price to them significantly; or 2. risk that the SaaS provider goes out of business, is acquired, pivots, or otherwise significantly changes the service.
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.
It doesn't work that way in practice. I've been to more than one enterprise where an in-house developed application was no longer maintained, original developers were not available, and no one knew how the application even worked. There are very high risks in in-house developed applications, particularly if they are not vital for the enterprise (harder to have resources to maintain/enhance). Risk of SaaS provider going out of business or raising prices is no higher than traditional on-premise enterprise vendors (one can argue it's a lot lower). In short, there are risks in all approaches and they need to be managed. Good application architecture help manage those risks regardless of which route is chosen.
I disagree completely. Another benefit of traditional on-prem vendors is that it's a lot easier to get source code escrow written into the contract as a force majeur or bankruptcy contingency.
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.
Github (SaaS) is not f(team size), it is f(projects). You can have as many users as you want and the price will stay the same, if you don't cross certain repository thresholds.
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))
I realise some of those services aren't directly f(team size), but as a general rule of thumb, f(projects) is a proxy for 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).
That depends highly on your team. If I have 20 support people with access to GH, but no coding work, the cost factor is not the team size. On GH enterprise, that's another kind of math. There's certainly also projects that just run in one repos for ages (long live the monolith).
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.
Interesting. Cheaper than the salary for an employee and probably together are able to help you do more than a single person.
> Cheaper than the salary for an employee...
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.
So you're saying we need a SaaS service for managing other SaaS services and integrating them and keeping up to date with changes! :p
actually....
Also, if the services are important for you and need to run 24/7, you need to calculate at least 3 employees (sick leave, holidays, 24/7 pager duty...).
It's worth pointing out that, according to their team page [0], Sawhorse Media has zero dedicated backend engineers (apart from maybe their CTO). So, in their case, the alternative would be to hire someone just to manage these things (sysadmin, engineer, or whatever). In this case, I can see why they would make the choice of outsourcing everything.
But if you already have an in-house engineering team who is reasonably competent at maintaining services, the tradeoff is probably different.
Agreed. Even when you have an in-house team, there are always other things that are core to your business to do. Growing a team is hard and expensive beyond the cost of the additional engineer. These SaaS tools let startups stay smaller, and that's priceless.
There's a lot of unnecessary costs listed. For example, they spend $165.00 on dropbox for the team, but also use Gmail services (meaning they have Google accounts which come with a free 10GB of storage).
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.
Paying someone to micromanage the services to get cost savings would cost at least $60,000 a year and make the company lose focus. There's no way digging into the details of the Mailchimp spend structure, for instance, is worth the time.
> There's no way digging into the details of the Mailchimp spend structure, for instance, is worth the time.
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.
They aren't trying to reduce costs, they are trying to focus on their product and growing their company.
That's fine so long as the money flows nice, but if/when things get tougher, they will have to scramble to find a solution.
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.
~~~~~~~
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.
"The business side should very much care about not wasting money unnecessarily, even during the good times."
How many businesses have you run?
Very few of these services can easily be replaced. You mention OpenFire XMPP - it has very few of the features that Flowdock has and is more of an effort to set up for end-users (compared with downloading an app or logging in on a website). You'd end up at most paying slightly less for a bunch of services with fewer features, at great disruption to your business.
For many companies, the chat is critical. Also, if one person has to fix the chat for 1 hour a month, you are easily paying more for that person then for the external service.
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.
I set up OpenFire ~7 years ago for our company, and I think I've spent less than two hours on maintaining it in that time.
I'm more certain every day that there is a place in the market for a company offering "subscription management" service. Manage all SaaS for a business (or personal as well!), keeping costs low and utilization high. Provide one central billing endpoint.
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.
Have been thinking about this for a while with a partner of mine and worked on a prototype, here are some screenshots:
https://www.dropbox.com/s/cdbx6e27movkj8q/Contract%20Tags.pn...
https://www.dropbox.com/s/goc2fextcdqb6qn/Contract%20View.pn...
https://www.dropbox.com/s/rae05ubbnlgopqi/Add%20Contract.png...
If anyone is interested to chat about this some more, email is in my profile!
I thought about this too last year. Such a service could also audit your services list every so often and ask you if you're still using them. If not, they could remind you to cancel or cancel for you, saving you money.
Actually, this is a pretty good idea! It's going on my idea list.
Started working on one of those on a conceptual level. The main problem is that some of those services provide no management API nor want to resell, which would be the best source of revenue in my opinion. Without that, you have a glorified "I'm using this/that" list.
Yeah, another problem stemming from this is that in many cases the user would need to grant you full account access. Still, Mint is a good example of a product that was able to gain enough trust from users that it had full access to all bank accounts, so maybe such a requirement is not an inhibiting issue. Any good product would need to be backed by a solid team with trustworthy backgrounds, though. This likely wouldn't work as a side project.
If the service just provided "add a user, remove a user (hired, fired) and adjust billing appropriately", it would already be worth a lot and wouldn't need full account access.
Its mind-boggling how many accounts I still have for companies I don't work for anymore.
Yeah, that would work, but the issue is that if you want to support "every" SaaS company, you need to solve the problem of integrating an SaaS product that does not offer granular permissions. e.g. An "admin" account that could grant/revoke access to users might necessarily also have access to sensitive company data.
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...
Agreed. I recently started work for a new company and they forgot to add me to some services so I needed to request access and then had to wait for them to get to it. A one-click "Add/Remove user for all our services" would be quite valuable in itself. And then the potential cost savings that could come from cancelling/reducing unused SaaS services would make it more valuable.
I run a SaaS business which requires pretty much full access to your GMail account (we don't require delete capabilities). Originally, I thought nobody would grant that much access over their email. But it surprised me how many people are willing to do that. Sure, there are some people who are wary and not do it but I think people on HN vastly over estimate the percentage. As you said, Mint is a great counter-example.
What we really need: an idea list manager and an endpoint for all of your ideas.
I was thinking man - they don’t even have 1 really expensive SaaS product on the list… $60k for all those solutions seems very very cheap. Just setting up an open-source alternative to something that costs <$500/yr probably ends up costing you more - without upgrades and management.
I saw the setup of a ticket system (with some tayloring, server and user setup, etc.) quoted at 20k EUR, which I found a reasonable price.
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.
I wonder how many of those service are at a "just in case" level? I see a number of products I have/do use, but the team only needed a smaller version of. (for instance, $97 for Github when a $25 org plan would work)
Since we run two products (both Muck Rack and the Shorty Awards), we end up paying twice for some services like Github.
I don't understand why you would host your source code externally?
You can buy Atlassian Stash, once, for $1800/25 users, and use it forever: https://www.atlassian.com/software/stash/pricing
A lot of companies end up going with something similar to this, since Github Enterprise costs get a little crazy. Stash is good, but if one is looking for an even lower cost option, a lot of people recommend Gitlab now-days.
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.
Plus the hidden cost of setting it up. Example: Backing up Stash - while being relatively straight-forward - comes with some amount of scripting and testing (you do test your backup, do you?).
Not saying Stash is bad (the contrary), but when evaluating cost, evaluate all cost.
Github is really attractive with all the services that integrate into it. A service at $100/mo isn't much when you consider any labor time it saves ($50-$150/hour generally)
... and Stash is really attractive with all the local plugins that integrate with it, and allow you to do things that are really hard when you're stuck with web hooks.
Local installations don't cost hours-a-month to run.
While interesting - there's often a free or opensource alternative for these "generic" SaaS services. You'd probably be spending just as much on this list if you used no SaaS products and hired an engineer to either maintain the open source versions or add similar custom functionality to your product/CMS/dashboard/somewhere. If you hired the engineer, you'd probably get the exact functionality you needed too.
We have engineers and we already spend a lot more on them than we do on SaaS. But we want them focused on building Muck Rack into an awesome PR tool for our customers, not internal tools unless they're specific to our product.
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/
And yet, you're paying those engineers (and every other employee) to waste their time using N different non-integrated services, all of which change at random whenever a new release is pushed out, disrupting your processes.
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.
> 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. All you need is one engineer that can also run a single small internal server. Just one.
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.
From experience: That level of maintenance only grows to sysadmin proportions at a scale where you can hire a sysadmin.
These systems largely run themselves, indefinitely.
Not to mention there's a lot of SysAdmins out there that will do the job very well for a lot less than $60K a year. You don't need to hire a SysAdmin who used to work on Google sized infrastructure to run your internal startup's IT.
Salary is just a part of the total cost of an employee. You have to take into account: recruiting, office space, food, medical insurance, payroll tax, stock options, etc. Usually these things will be equivalent to the salary.
Hiring an engineer to work on things that are not strategic to your core products or services seems like a distraction. Engineers also cost a lot more than 55k per year. Even if you could, I can't anyone who would be willing to maintain 30+ open source products as part of their job.
ahh what!!!! did you see the amount of services provided?? could you please support your statement with some logic
So $55k isn't really enough to hire an engineer, but generally speaking many of these services can be setup in a day or two based on open source software or other free tools. I wonder if you made a clear business case based on the features you need, what the result would be. That being said, not having to run it is worth something.
this is really interesting - i work at an internal incubator at Intel ( new business initiatives ) ...and we don't use nearly this many services in our new ventures - so an interesting contrast for sure.
i interesting to see what breaks the 99 barrier
That's a lot of money spend for not so much in return, imho. Not to even mention the time spend on integration everything with each other. Which also equals are certain money amount.
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.
$60k/year is 1/3 to 1/2 a developer/sysadmin. If maintaining in-house systems based on open source equivalents of all of those packages would take more than 1/2 a headcount, then they are making the right choice.
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.
yes that's the tradeoff/investment, where people differ of opinion and I (very technical person, not management/paper pusher), find it more important to have in-house capabilities (even at higher cost) then to simply rely on a third party vendor.
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.
I don't know why so many people keep tossing the $60K-$120K figure around for a SysAdmin. Your startup is not on the level of a Facebook/Google and does not need a SysAdmin who's background is managing systems at that scale. You really just need a college student who can run a few small servers and knows how to make backups for when things hit the fan. We're talking $15-$20 an hour, they get a lot of great work experience, and you get manged in-house IT.
Heck, there are paid, commercial software suites that are far, far, far, cheaper than this.
Sorry for offtopic, but that animation on Muck Rack startpage is one of the slowest I've ever seen. It really freezes.