Inflation of SaaS Development Services

Introduction

I’m sure you have all seen this picture of Yusuf Dikeç. Here is a description of him taken from olympics.com:

His casual look and lack of professional equipment have been the talk of social media, but it would be unwise to underestimate his quality on this basis. Dikec won Türkiye’s second medal of the Games and their first ever medal in Olympic shooting in Paris, taking silver in the 10m air pistol mixed team event alongside Sevval Ilayda Tarhan.

When you are trying to build a software product, you are bombarded with many shiny options. For deployment we have Netlify, Vercel, Cloudflare Pages, AWS… For analytics we have Google Analytics, Hotjar, Amplitude… For authentication we have Auth0, Firebase Auth, AWS Cognito… There are SEO (Search Engine Optimization) services, CMS (Content Management System) services, there are services that help you with A/B testing, services that help you with user feedback… The list goes on and on. I’m not against using these services. There are great, life-saving services with fair pricing, I use some of them (although free tier, I’d happily upgrade if need be) on this website.

Even though most of these services provide very good starting packages for free, they can get very expensive very quickly. And the worst part is, you don’t even realize it until you are too deep in the service.

SaaS companies have a huge profit margin between 68-75%. It is estimated by the research group Gartner that the spending on SaaS tools has increased 18% percent in 2023. It is now close to 200 billion dollars. Everyone is trying to build the next hot SaaS startup as quick as possible. However, most of these services are not worth the money.

In today’s article, I’ll tackle the issue of too many development services driving the cost of development too high. Both for solo developers and big companies without providing any meaningful time gain. I’ll argue that you might not need all of the hyper-advertised services to build a successful product following the example of Yusuf Dikeç who won a silver medal in the Olympics with his hands in his pocket.

Software as a Service: Software as a service is a form of cloud computing in which the provider offers the use of application software to a client and manages all the physical and software resources used by the application. The distinguishing feature of SaaS compared to other software delivery models is that it separates “the possession and ownership of software from its use”. SaaS began around the turn of the twenty-first century and became the main form of software application deployment by 2023.

Structure

Cloud is not as cheap as you think
- Exit Fees
- Lobsidedness
There are even worse
Good services
Conclusion
References

Cloud is not as cheap as you think

Do you know what makes Jeff Bezos the richest guy in the world? Well AWS surely contributes. Some analysts even predict that AWS can be bigger than Amazon. Its revenue is growing each quarter. With the current AI boom, we can expect it to grow even more.

Even though AWS is a wrapper service around simple software applications, there are even wrappers around AWS. Vercel and Netlify are nothing more than a wrapper and a UI for AWS. There is nothing wrong with using them as a solo developer as long as you are on the free plan but once you go into the paid territory, it is much more profitable to use AWS directly or even better, use a VPS (Virtual Private Server) provider like DigitalOcean, set up your own CI/CD (Continuous Integration/Continuous Deployment) pipeline and save a lot of money.

Also even though AWS is an abstraction that should make things easier for developers it still has 12 certification paths available as of this writing.

Exit Fees

Thanks to EU regulations, Google Cloud and AWS are now removing or reducing egress fees. However in the past, if you wanted to move your data out of these services, you had to pay a sizable fee. So, it is easy to get into these services but hard to get out. It is almost free to start out but once you are in, you are in deep. This is a common strategy in the SaaS world and a pain for VCs (Venture Capitalists).

Data Egress Fees: Data egress fees are charges from cloud providers for moving or transferring data from the cloud storage where it was uploaded. These fees, also known as bandwidth or data transfer fees, are separate from the fees organizations pay for cloud storage and computing. (Taken from Cloudflare)

Lobsidedness

The problem with the SaaS market is that many services that are focused on the same thing, have wildly different pricing. For example, for Cloudflare 1TB of egress overage is “free for most services”, while Netlify charges you a whopping 550$! The only difference is UI but still, these expensive services are used by a lot of companies.

Note: I like Cloudflare. They have a great free tier and their services are top-notch. I think they are doing a pretty good job.

There are even worse

Cloud services I mentioned are innocent compared to most of the SaaS services. There are lots of services that sell you things that have no value at all. A seasoned developer could make that service in a day. For example, there are services that help you build forms that take just a few lines of HTML and CSS! There are really expensive services that help you with SEO, which is not rocket science. You most likely don’t need those services if you do not have too much extra money to spend.

There are services that sell you soulless designs. You could probably hire a designer for a few weeks to make you a much better design than what you would get from a service. Also, most of these services actually don’t sell you the design, they rent it. You need to be a subscriber to use it and pay monthly. If you stop paying, you lose the design and they can change their pricing whenever they want. Making you susceptible to a ransom.

Now, it is even worse with a lot of AI SaaS booming. 99% percent of these services are just a wrapper around ChatGPT that provides nothing of value. They are just a fancy UI that you can make in a few days. They are not worth the money or the hype. I advise you not to use them, however, if you have some free time you can try to spam AI SaaS services to make money. Seems that people are buying them.

Good services

There is no definitive list of ‘good services’ and ‘bad services. However, there are some guidelines you can follow to determine if a service is worth it or not. Here are some of them:

Does it save you time? If it does, it might be worth it. If you buy a service and you still need to spend as much time as you would do it yourself, it is not worth it. Just do it yourself, save money, own it.
Is it a core feature? If it is a core feature of your product, you should probably do it yourself. You should own it. You should be able to change it and scale it whenever you want.
Is it sustainable? If you are a solo developer, you should probably not use a service that costs more than your rent. If you are a company, you should probably not use a service that costs more than your revenue. If you are a VC, you should probably not invest in a company that uses a service that costs more than its revenue. Basic economics.
Do they lock you in? If they do, you should probably not use that service. You should be able to move your data whenever you want. You should be able to move your users whenever you want. Make sure there are good alternatives and migration strategies for yourself if the service you choose gets discontinued or increase prices too much.
Is there a free, open-source alternative? For some service types, there are no free alternatives because it is not sustainable without money. However, for some services, there are free, open-source alternatives that are as good as if not better than the paid ones. You should probably use them.

Conclusion

In this article, I have talked about “Software as a Service” development tools and how they can inflate the cost of development while making a bank. Next time, you are starting a new startup or a project think hard before you dedicate which features you should outsource to a SaaS service. Consider the lessons from Yusuf Dikeç’s Olympic success; you might not need the fanciest equipments to build your product.