The entire pure-play Software as a Service industry has a terrible profitability problem. Salesforce is by far the biggest player in the industry and it’s ability to spin the narrative for so long has to eventually come to an end.
I’ve been in management in the software industry for 40+ years. The SaaS startups have survived financially for primarily two reasons 1) a 10 year+ environment of easy capital, and 2) ability to keep going even though they don’t really charge enough to cover their costs.I guess an argument can be made that if they cut costs dramatically then they could make enough money and keep prices where they are, but I’m not so sure about that. I think they will have to cut costs AND raise prices dramatically to become more attractive than a consumer staples company to an investor who is serious about getting a return that justifies the risk.
Who knows how Corporate America will react if all of a sudden their SaaS costs double, but what alternatives do they really have anymore? Cheap (relatively) SaaS has driven many of the non-SaaS’s out of business and the other SaaS’s just have the same problems as Salesforce.
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