Research

Home»Concerning the Financial Markets»Loosing trust in SaaS, at least for startups

Loosing trust in SaaS, at least for startups

Late last month it was announced Facebook would be shutting down Parse.  This came as a surprise from many as there wasn’t any indication Facebook was planning to change direction for Parse.  Looking at the decision in more detail makes sense however as Facebook is moving to consolidate around its own ecosystem instead of enabling other external apps.  This aside, one of the interesting developments is Parse has given users until January 28th 2017 to migrate off their services, an uncharacteristically long amount of time.  Parse even went the next mile and open sourced a Parse compatible API on Github.  This contrasted with news this week that Palantir acquired Kimono.  Instead of giving users a year to migrate to another platform, Kimono announced service would be suspended by the end of the month – just about two weeks before their service would become unavailable.  Furthermore no part of their product was open sourced or alternatives provided for their current customers.

We’ve seen this happen over and over – smaller SaaS startups get acquired or fold leaving their customers searching for an alternative, many times with little time to make a transition.  Their existence is becoming increasingly ephemeral and many times customers have little or no warning before the rug is pulled out from underneath them.  This forces companies who used those services to invest time and energy to find alternative services instead of continuing to develop their core product.  For SaaS products like Kimono and Parse, the advantages they bring has always been being able to leverage SaaS within a technology stack to more quickly develop and implement a product.  This is critical when attempting to scale and develop a product in such a fast pace iterative environment like tech.  However the disadvantages of relying on a SaaS startup is significant and grow as the product matures and user base increases.  Irregardless of industry standard integration modalities and distributed computing, there is never a 1 for 1 SaaS replacement and functionality can vary greatly.  The cost of replacing a specialized SaaS product can be significant especially when attempting to migrate within 2 weeks.

There are about a dozen other services that have similar capabilities that Kimono had. But will companies be willing to invest in a transition, if the same scenario will play out again in 6 months?  Startup SaaS companies are going to have an increasingly difficult time finding new enterprise customers with the current trend, which is ironic since their end goal is most often to be acquired.  Not to mention if not acquired typically these startups have a limited runway, meaning if they don’t reach break even they’ll risk shutting down again abandoning their customers.  The industry is going to start to shift to a position of stability, looking for SaaS services from established companies or leveraging the cloud to host their own technology stacks within their control.

Written by

The author didnt add any Information to his profile yet

Leave a Comment