I’m noticing a very interesting micro-trend in my inquiries this month. I’ve taken several calls from clients who are nearing the end of a subscription to a software solution and are now taking the opportunity to look around. Some are accessing their solutions via hosted delivery, others via SaaS. Either way, the impetus for the market survey is the same: when access to a solution is about to end, few organizations these days can justify simply “renewing” an arrangement. Cost-cutting is driving a fresh look at pricing, even when the client is satisfied with the vendor. Whether an organization is cost cutting or not, reviewing the options and testing the market is a best practice before rolling over ANY contract.
The implication of this phenomenon is that SaaS/hosted vendors are likely to see greater levels of customer churn that traditional on-premises solutions providers. In a perpetual license deal, there is no corresponding natural “point” at which a customer would pause and contemplate their options. As a result, I believe that on prem users are much less likely to have a formal look around several years into their agreements.
The outcome of these subscription-expiration based sourcing projects will of course vary considerably from one product type to another. But in procurement, where alternatives are plentiful . . this phenomenon may spell some long-term pain for SaaS vendors.
Read Complimentary Relevant Research
Predicts 2017: Artificial Intelligence
Artificial intelligence is changing the way in which organizations innovate and communicate their processes, products and services. Practical...
View Relevant Webinars
How to Live Without Mobile Device Management
This webinar addresses the growing trend of users refusing to have enterprise management of their mobile devices due to privacy concerns....
Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes, with attribution to Gartner. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.