The low cost web

I often meet competitors, web application owners and accountants who say, “Why do you sell your product at such a low price?”

Interestingly the question is sometimes a disguise for a discomfort they feel around why they charge so much for their own product or in the case for accountants, why they are paying such a high price elsewhere versus what they pay for our online accounting application licences.

I might be crazy to have this dream but back in the early nineties when I was part of a team building one of Australia’s first online banking websites I was of the belief that the web was designed to save people and businesses money. We wanted to remove banking costs through a self service website.

I really believed that dream. I formulated Saasu in 1998 to continue that dream with the plan to decimate the cost structure of SME accounting software or at least change the way the big software providers operated in our country. I wanted to build a $1500 online accounting application with inventory, payroll, a light CRM and sell it for $299. That was my plan. This I thought would help empower businesses, save capital expense and put an end to tax table update racket that plagued accounting software in our country.

Many believe in the dream of the cheap web, I’m not alone. It is evident in Google Enterprise with their $50 per year plan, GotoMeeting with their $49 per month service and Last.fm with their unlimited music for $5 a month. Probably the most famous in this space for the fight against old pricing models (in the medium to larger enterprise sector) is Salesforce.com who while being a bit above some small business price tolerance levels is actually very inexpensive for it’s market.

The reality is that prices can be low, and businesses like ours are profitable and we can hand the massive savings the web brings back to customers through low prices. I must disclaim that I am a bit more of a social capitalist than your average CEO.

I refer to this as the big joke in our industry. Look around, online applications are nearly always more expensive than software. I’ve subscribed to a few products this year that while I think they are great products they are very expensive for what they offer so I can’t and won’t recommend them to customers and the reality is they are probably a competitor away from losing me. Products need to be both effective and inexpensive, not just one of these.

Sometimes the counter argument is that you should pay up and that for some magical reason this means you are getting a feature rich quality product. This isn’t always the case. In my experience expensive products often don’t have a great feature set. These companies usually have to spend a lot of money marketing to get the sales in the door because of the high price barrier. As a business owner or accountant we all should be totally committed to cost effectiveness ratio. Costs translate into the cost of goods value and thus translate into retail price our customers pay. Cost management is very important so you can make good margins BUT NOT at the expense of your customer. It’s what I call profitability with integrity.

When did the industry decide that small business has a bottomless pit of funds to pay subscription fees? They don’t! Every dollar counts, every dollar is felt, and that should be treated with respect as it directly impacts their business success and at the end of the day that means their families.

So where did it fail for many companies who don’t seem to believe in this crazy dream. I think the answer is with banks and shareholders. The dotcom bust really scared the crap out of bankers and c-level management in technology companies. Most went broke and then the rest decided that customers should pay up. Pay up for their ventures through higher prices, pay for their VC deals or equity issuance. The customer would pay for more certainty for their management and their shareholders and give them the grace of a quicker path to profitability through a higher price paid at checkout by the customers.

Saasu took 8 years to become profitable, we did that because we believed in our price structure. We dedicated ourselves to creating a low cost product. We hold prices as low as we can and we were alone in the market, we could have charged more. However, we believe in this crazy dream that web applications should cost less than software and we have stuck with it.

That’s who we are at Saasu.