Rob Desisto, my former Gartner colleague, observes
This means there is no ability for a SaaS customer to pay for what they use, something we commonly see with infrastructure as a service or in many lower end consumer or SOHO applications. This was supposed to be one of the foundational tenants of SaaS but has rarely been offered because SaaS vendors want large contract lock in.
Rob is correct – fixed costs are a dirty term in IT. And I starting to see some customers ask SaaS vendors to apply CMM Level 5 and Six Sigma continuous improvement concepts as they did on multi-year offshore support contracts.
But here is where Rob has a “forest v trees” problem. For most enterprises the payback is still X times higher to optimize IBM data center, SAP maintenance, Verizon MPLS or Infosys application management spend than it is to beat down Salesforce or Workday spend. In fact moving spend to cloud vendors is often the best path to those savings.
So frankly, Rob’s colleagues in those areas should be calling those vendors “legacy dinosaurs” and advising customers how to optimize that spend.
Finally, talking of fixed costs, spend with Gartner falls in to that bucket. Gartner’s salespeople are incented on a metric called Net Contract Value Increase or NCVI – which from a customer’s POV equals a steadily increasing fixed cost.
Optimizing that spend is also pretty good payback.
(Cross-posted @ DealArchitect Full)