Every week I’ll provide updates on the latest trends in cloud software companies. Follow along to stay up to date! **Please excuse any typos or repetitiveness, I’m writing this as I watch the Warriors game so very distracted. Go Dubs! ** Consumption Pricing vs SaaS Subscription
I think one aspect of this I've seen misunderstood is the impact to the bottom line. As you say in your post, typically the "money is wired up front" so Snowflake has this money in the bank when the contract is signed. However, Snowflake can't recognize this money until the customer actually uses the service and spends the credits their money bought them. But the important part of this is the "contract" part. Let's say in the worst case a customer didn't consume their contract and didn't want to renew (rare at 174% NRR). Snowflake would still eventually recognize the remainder of the credits at the end of the contract. However, this is rare. As long as customers renew for the same amount or more, any unused credits would roll over to the new contract if the initial estimate turned out to be a little high.
Reflective of the points that Morgan Stanley Research were making, compare Snowflake NPS and Dresner Customer Satisfaction Scores with that of vendors who routinely oversell customers features and seats that go unused--in some cases, forever. There is a reason why customers like Snowflake so much and this is one of them.
Thanks for the article. A quick question - why you don't include Pega and Upland in your list. Pega is particularly puzzling for me as you have Appian. I would also include Informatica, but I guess you can argue that it is not "cloudy" enough
Fantastic read. Thanks for distilling.
I think one aspect of this I've seen misunderstood is the impact to the bottom line. As you say in your post, typically the "money is wired up front" so Snowflake has this money in the bank when the contract is signed. However, Snowflake can't recognize this money until the customer actually uses the service and spends the credits their money bought them. But the important part of this is the "contract" part. Let's say in the worst case a customer didn't consume their contract and didn't want to renew (rare at 174% NRR). Snowflake would still eventually recognize the remainder of the credits at the end of the contract. However, this is rare. As long as customers renew for the same amount or more, any unused credits would roll over to the new contract if the initial estimate turned out to be a little high.
Reflective of the points that Morgan Stanley Research were making, compare Snowflake NPS and Dresner Customer Satisfaction Scores with that of vendors who routinely oversell customers features and seats that go unused--in some cases, forever. There is a reason why customers like Snowflake so much and this is one of them.
Thanks for the article. A quick question - why you don't include Pega and Upland in your list. Pega is particularly puzzling for me as you have Appian. I would also include Informatica, but I guess you can argue that it is not "cloudy" enough