The Server in the Closet
6 hours ago
- #technology
- #business-strategy
- #SaaS
- The article advocates for owning technology infrastructure rather than renting it, highlighting cost savings and competitive advantages.
- 37signals saved $2 million in the first year by moving from AWS to owning Dell servers, with projected savings of over $10 million in five years.
- Integration of common SaaS solutions (Salesforce, HubSpot, AWS) leads to lack of competitive differentiation, termed 'integration theater'.
- Netflix, Amazon, and TikTok's proprietary technologies (recommendation algorithms) drive significant revenue and user engagement, showcasing the value of owning core tech.
- AI is commoditizing many services, making proprietary development more accessible and reducing the value of rented solutions.
- SaaS vendors face a 'feature-parity death spiral', where differentiation becomes impossible, leading to price-based competition and margin compression.
- Building proprietary technology requires initial effort but results in long-term competitive moats that rented solutions cannot replicate.
- The article emphasizes the importance of patient capital and long-term thinking (five-year horizons) over short-term metrics like quarterly OKRs.
- Key question posed: 'What are we paying millions for annually that we could own for a fraction of that?'
- Final takeaway: The real question is not whether you can afford to build, but whether you can afford to keep renting commoditized solutions.