Thoughts on what businesses actually need from the Cloud, not what vendors wish they needed.

Chris Bliss

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Lessons learned from the Chargify Debacle

Ack! Chargify did what?

The news of the week in SaaS has to be Chargify’s new pricing scheme. For those of you living in vacuous SaaS-deprived subterranean caves, Chargify is a billing service geared toward companies with recurring payment systems. It’s a feature-rich service that’s looking to edge out competition from Recurly, Spreedly and Braintree, among others.

That competition will have entertained some schadenfreude this week as Chargify hiked price rates across the board, including for existing customers. Here’s a before/after price comparison: notice most price points increased by leaps and bounds, and that “free” accounts with fewer than fifty customers will now be charged $99/mo. Nothing per year to $1,200 per year is a pretty large price hike, especially considering the complete lack of warning, and customers aren’t happy. The prevailing sentiment in the blogosphere and twitter is that Chargify screwed early risk-taking clients with unforeseeable price-gouging and marginal service improvement, ala Zendesk of this spring. It’s a PR nightmare and a competitor’s best dream.

To their credit, Chargify addressed customer concerns on their blog, explaining that price hikes were essential for them to stay in business and apologizing for the lack of warning. They also reversed course and offered a $39/mo plan for existing customers billing less than 100 clients. Damage control perhaps but it’s good to see that CEOs listen sometimes.

The big picture stuff

I’m not really interested in judging Chargify, though I’m not impressed by some of their decisions. What’s more interesting about the situation are the questions it raises. What’s the baseline treatment SaaS providers owe early adopters? How does price scale with size when services are subscription based? How do you manage and adapt to changing growth forecasts without pissing off your core clientele? Whaddya do?

Lessons for clients and vendors

These aren’t easy questions but, as I’m sure Chargify’s management can attest to, they’re essential. From a user’s perspective, price protection is absolutely paramount. Price guarantees, three month buffer zones, whatever it takes to lower risk and instability: offer it. Otherwise, vendor-client trust erodes, user-side cost forecasting disappears, and providers gain the upper edge in a relationship whose fundamental strength is its horizontal nature. It’s just not right and it makes SaaS deployment risky, hurting everyone.

On the provider side, the answer is do your math. Chargify shouldn’t have charged nothing: it was unsustainable and endangered the stability of client companies. If their growth forecasts changed as they claimed they did, and they realized the model wasn’t working, they should have grandfathered in existing customers, implementing the new plan for future prospects only. If that wasn’t sustainable, they should have at the very, very least given users a healthy heads up, and well in advance. Users deserve it.

UPDATE: Since this blog was posted, Chargify’s founder David Hauser sent out an email w/ the following message:

Price assurance guarantee: We now understand that it’s impossible to grow your business if you can’t be sure how much Chargify will cost you. Going forward with our new plans, you won’t have to worry anymore because all plans will come with a 100% grandfathering guarantee for 12 months from the time of a price change. This means that any plan you’re on will be priced the same for you for 12 months from the implementation of a price increase.

Sounds like someones been reading the right material…

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Chris Bliss works at VM Associates, an end-user consultancy for businesses looking to move to the cloud from pre-existing legacy systems.