At the beginning of 2024, the smoke of gunpowder in the enterprise service market has risen. IaaS price reduction, SaaS price increase, who moved the first domino?
Since the announcement of the price reduction in the first half of 2023, in less than a year, Alibaba Cloud has once again stirred up the spring water of the public cloud market with the price reduction.
February 29 is a special day for domestic cloud vendors. On this day, Alibaba Cloud released its strategy for the new fiscal year - "the largest price reduction in history". The price reductions cover all core products such as compute, storage, and databases, with an average price reduction of more than 20% and a maximum reduction of 55%.
In fact, starting from 2023, in order to attract new customers and lock in users' long-term IT budgets, many cloud vendors will regularly and irregularly reduce prices.
In the field of cloud computing, appropriately reducing profits and increasing scale is the long-term strategy of the cloud computing business model. This strategy is also an effective way to expand market share and accelerate market penetration. It's brutal, but it works.
The past year has been a tortuous year for Alibaba Cloud, from independent IPOs to suspension of spin-offs, Alibaba Cloud has finally determined its strategic direction of focusing on public cloud. In Alibaba Cloud's view, there is still a lot of room for development in the domestic public cloud market, let's look at two sets of data:
According to data from the China Academy of Information and Communications Technology in 2022, public cloud accounts for more than 60% of the computing power structure in the United States, more than 50% in Europe, and only 28% in China.
According to IDC, public cloud accounted for 34% of domestic enterprise IT spending in 2021, and will only grow to 39% in 2023. At the same point in 2021, public cloud accounted for 52% of enterprise IT spending in the U.S. and more than 40% in Western Europe, both of which grew faster than China over the past two years.
Judging from the above data, whether it is market penetration or market size, the cloud computing battlefield is far from the endgame. In this context, in order to accelerate the penetration of public cloud in the Chinese market, Alibaba Cloud has launched a new round of large-scale price reduction.
Alibaba Cloud's price cut was like a domino effect, which quickly triggered a reaction from other cloud vendors. On the evening of February 29, JD Cloud issued a document saying: "Drop casually, compare to the end!" We continue to compare prices across the network! Breakdown low price! 10% lower", and promised to "buy expensive and pay off".
As of press time, except for JD Cloud's "battle", other cloud vendors have not yet spoken, and it is foreseeable that a new round of price reductions by public cloud vendors is already on the way.
Some people may not be ashamed of the price reduction of cloud manufacturers, thinking that its essence is "volume". However, in the current domestic public cloud market, price reduction seems to have become a necessary strategy. Judging from the above data, there is still huge room for penetration in this market, which means that there are still a large number of potential users who have not yet been converted into actual users. Cloud vendors choose to "endure the pain" to reduce prices, and what they are pursuing behind is a larger market scale.
In the past, making ** and sending text messages ** were relatively expensive means of communication, but with the increasing popularity, these services have gradually changed from luxury goods to civilian consumer goods, and ** are becoming more and more affordable. In the same way, IaaS is the infrastructure of digitalization, and when digitalization becomes more and more popular, the expenditure of cloud expenses is getting lower and lower, which is an inevitable trend. There is a "leading brother" who has come out to launch the "cloud price reduction" dispute, and it is also good for the entire enterprise service market to knock it down.
Throughout the entire enterprise service market,IaaS achieves a long-tail effect by expanding its scale, while SaaS vendors hope to increase profits through more direct price increases.
Coincidentally, on the day when Alibaba Cloud and JD Cloud officially announced the price reduction, Ren Xianghui, the founder of Mingdao Cloud, announced the price increase of the company's products in the circle of friends. It is understood that this is the first time that Mingdao Cloud has made significant pricing adjustments since its release in 2019. Ren Xianghui said, "The large adjustment at the beginning is a one-time response to the cost ratio, and I don't want to adjust the price often." ”
Ren Xianghui**, starting from this year, the price increase of software products will definitely be a general trend. No matter how it is adjusted, the domestic SaaS pricing is still much lower than that of overseas peers.
On the one hand, IaaS, as a digital infrastructure, is experiencing a wave of price reductions led by the largest cloud vendor in China; On the other hand, many SaaS vendors are facing the choice of pricing strategy. It is undeniable that the price reduction of cloud vendors in the IaaS field has indeed brought cost reductions to SaaS vendors, which can be described as a "relief in the snow" for SaaS vendors in the cold winter. However, IaaS price reductions alone cannot solve the pressure of SaaS survival.
Some people in the industry saidThe popularity of SaaS is a trend. SaaS is an application that grows on the cloud, and as the application capability becomes stronger and the value it brings to customers increases, the price increase is a manifestation of the positive cycle of the market
When SaaS companies have more revenue to invest in product research and development, they can make better products and better serve customers. Considering that China's SaaS is comparable to the United States' SaaS in terms of cost input, but it is generally lower than the other party's exchange rate, which is an extremely unhealthy growth environment for domestic SaaS.
There is also an opinion that in previous years, SaaS companies were too easy to raise funds, and many companies got investment. When funds are abundant, we take revenue growth as the main goal. But from the beginning of 2022, the wind has taken a sharp turn, and today, almost all SaaS companies are aware of the importance of profitsIn the year of "profit is king", in addition to looking at the customer outward and looking at the organization inward, the third option is the value of the product matched.
In the SaaS market, there are different opinions in the industry on whether to raise prices or not. But anyway,SaaS should be comprehensively considered according to its own market positioning, customer needs, and product value, of course, the value that the product brings to customers is the first place.
Price increases are a very complicated thing, and price increases do not necessarily mean "death", but can price increases really save SaaS from fire and water? Welcome to leave a message**