It has been a long time It’s been a while since Salesforce helped change the tech world by claiming it was going to change end of software. The model of selling access to a managed service hosted in the cloud (what we generally call software as a service today, or SaaS) didn’t end software, of course, but it turned people away from buying software in a box.
Exchanges were simple. Software as a service was cheaper up front, but could cost more over time. In return, the vendors promised regular updates and you never had an outdated version. Regardless of how you feel about the subscription economy, the transition from buying Microsoft Office in a box to renewing your Microsoft 365 subscription online is now a thing of the past.
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Salesforce’s model for selling access to its subscription software services was flawed. All business models are, but what some realized was that while SaaS and its ilk were neat profit centers for sellers, their costs could end up being misaligned with buyers’ needs. For example, if you pay for more seats than you use, or some of your paid seats only use the service a little, you could be paying for more software than you actually needed.
Introduce usage-based pricing, which involves charging for software based on how much of it is consumed. Just like how SaaS products consumed older software sales models, some people thought consumption-based pricing would be the next thing. Indeed, Twilio has grown to mammoth size on the back of the model, charting a Salesforce-like path for startups. From “end of software” to “ask your developer,” it looked like the future of software pricing was in jeopardy, especially during the venture’s last boom.
Then the economy turned, and tech companies suddenly had to deal with customers who wanted to lower their bills. Based on reading SaaS companies’ quarterly reports, it appears that while all software companies did some soul searching in mid-2022 and beyond, consumption-based models were hit the hardest. Maybe that’s why Salesforce’s founder is still its CEO, while Twilio’s isn’t.
