Insulated from these courtship rituals are the traditional on-premises vendors, because their contracts have no designated end-point to serve as inspiration for customers to evaluate alternatives and push for better deals. Not so for providers of non-perpetual solutions, Wilson says: "But in procurement, where alternatives are plentiful…this phenomenon may spell some long-term pain for SaaS vendors."
This "micro-trend," as Wilson calls it, highlights the widening gap between the subscription and perpetual models: as long as customers are willing to sign contracts that lock them in until the sun grows cold, on-premises vendors would have to be nuts to consider pushing alternatives to those converts. The predictable revenue streams from associated maintenance contracts, fed by an ever-widening circle of customers, are what led Oracle co-president Safra Catz to tell analysts last week that she thinks Oracle can push its margins above 50%. In return, customers can be confident that their on-premises vendors have contractual commitments to support, enhance, and upgrade their products in perpetuity.
Meanwhile, it's ironic that the non-premises providers Wilson blogs about as coming under increased scrutiny for lower prices represent the enterprise-software channel that in fact kicked off the less-expensive approach. So, should Wilson's trend play out, it will indeed result in some very serious long-term pain for SaaS vendors.