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Comment by tunesmith | Hacker News Reader

Trying this out: SaaS is rent-seeking. The next downturn, tons of these businesses (disproportionately) will be demolished.

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Back when every person in the office required their own secretary to do the work that they now do with Saas, did you call secretaries rent-seekers?

Saas is productivity growth at work. Rent-seekers add no additional productivity to the economy, they diminish it. Saas is the opposite.

Are there individual examples where Saas companies might be providing negative value? Of course (I assume somebody will respond below with one such personal anecdote).

However, in aggregate, Saas is not rent-seeking.

I'll share my anecdote for when it wasn't.

A previous employer of mine had paid 96k a year to use a client software on a per database installation basis (12k per license, 8 database installations across the company worldwide, for a total cost of 96k/year)..

However this software was a trivial CRUD app we used for dealing with CAD files. To be clear: we completely owned and managed the back end database ourselves, and just used the app as a client interface for searching/creating CAD files (which was super slow btw).

I could've created an equivalently functional client app within a week or two, that was both faster and more scalable. Doing so would have saved the company an obvious 96k a year in recurring costs, along with increased productivity. It might have taken a while longer than a week to deploy to users, but nonetheless would have alone justified my yearly salary. Additionally it wouldn't have taken 100% of my time a year to support or maintain such a client.

However, I couldn't convince managers it was worth it to rewrite it in house, despite no new features being added to the software by the vendor for over 8 years! Frankly, I'm still not sure why that was (ignorance I'd say), but I think it said how much I was respected there... so I left.

Actually, I lied - I still work there and am in the process of finding a new job. Frankly, it's stuff like this that makes me think I should just get with the times and start my own niche SaaS company and do "Rent-Seeking" to ignorant companies such as this, since they don't understand when something is cheaper to be done in house...

I think I'd agree.

I find SaaS is just outsourcing, and for whatever reason, management types need to come to understand that outsourcing is not always cheaper. It entirely depends on the circumstances.

Most businesses typically see IT as a cost center because they don't understand what IT is. The ones who outsource don't realize that a highly competent IT staff will both cost a lot of money and appear like they aren't working hard or doing a lot. So in the short term it looks like outsourcing (SaaS) is a way for the company to save costs, than doing things in house.

Frankly, the best analogy to SaaS/outsourcing I can think of is leasing cars...

It's cheaper in the short term to lease a car (i.e. outsource), than to buy a car (i.e. "do in house"). However in the long run it's generally cheaper to own a car than lease one. The exception is, if you have a need for a new car every 2-3 years, then leasing will be cheaper than always buying a new one every 2-3 years...

I think the same analogy applies to Renting vs Buying a house.

Anyhow, I'd argue most businesses would be better off in the long run doing things in house, but that requires paying more for upfront for talent (which makes such a prospect seem more expensive at first glance).

SaaS seems like a trap.

Step 1) Offer artificially cheap software to replace employees.

Step 2) Attracted by low prices and productivity, employers adopt software.

Step 3) Software works. Employers lay off employees.

Step 4) SaaS vendor needs to make profit, raises prices significantly.

Step 5) Software is no longer cost-effective to employer, but employer doesn't have employees to fall back on.

Talent pool is small and/or hard to access anyway, so even without step 3), as a manager, you always look at ways to do more with less, and SAAS gives you this. It's then a matter of finding the right balance.

This is also part of why I find B2C SaaS so aggravating. Sometimes it feels like there's not a more effective way to get in the way of my retirement plans. I mean, sure, in the prime of my career I like buying a new laptop every year or two, but there will come a time when I want to stop spending and just hold on to my assets until they break. You can't do that with yearly software licenses or subscription services.

Sure but you will still be paying property taxes, utilities bills, food and so on. It is not clear just how one would just "stop spending". Unless you want to spend your retirement foraging for food, sleeping under the bridge etc.

Do you think that Google Apps is outsourcing? Your company's CRM? The Office licenses that (at least) your finance team depends on? The payments company allowing companies to accept transactions online?

"SaaS as outsourcing" is just obviously wrong, as well as "SaaS is rent-seeking" (which seems to entirely misunderstand what "rent-seeking" means).

Hah, you apparently don't understand what outsourcing is.

It's a simple question of make/buy. All your examples are can be either made in house, or outsourced to someone else to make for you.

For example, do we make our own ERP system in house? Or do we use a vendor's (SAP)? Do we pay another company for doing financial transactions, or do we setup our own infrastructure?

Companies that use SaaS products are outsourcing a function... Another example: Do we host our own data center, or do outsource and use a cloud SaaS like AWS?

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