Blocked Data, Rising Costs: The Truth About Today’s SaaS Market w/ Alan Pentz & Tonya Berenson

Speaker A: They have some kind of software I think they use at one of their conferences where they put their logo on it. It's like white labeled. And they went into like, re up for that software. And the company just randomly added, uh, a $20,000 charge for putting the logo on, as they had always done for years for free software vendors, these legacy ones that have been around for a while, they're under pressure in the market because they're not growing the way they used to because AI native companies are coming in and stealing their thunder. And what they're kind of doing is slapping AI on top. So they give you that stupid little star button. 1, 2, 3, 4.

Speaker B: You're listening to Owner RX with Alan Pence, the podcast for business owners who want to scale without sacrifice. Each episode delivers battle tested strategies from the Owner RX playbook library, showing you exactly how to build systems that run without you. Here's your host, Alan Pence.

Speaker A: All right, we are back, back at it, Ms. Berenson, and lovely San Cugat, Spain. How are things in the approaching winter in Spain?

Speaker C: Still, still lovely. You know, I know it's, it's a cliche topic, but it is, it is what it is. Nice, nice, crisp and cool, sunny blue sky, man.

Speaker A: God, everybody should be in Spain in November. Um, um, that's true. So what should we talk, uh, about today?

Speaker C: Well, we were thinking about SAS vendors and it seems like they're price gouging. You wrote about this this week, Alan. Like price gouging, but also preventing you from accessing your own data is what I was reading, but I'm not quite understanding all of it. So let's talk about that in.

Speaker A: Yeah, uh, software as a service. So that's all your subscription software that you've got, you know, from your CRM to your, uh, productivity software to your ERP to your whatever. Right. And so, yeah, like, I was triggered by Jason Lemkin. He has a media company called Saster where he talks about helping SaaS companies build, you know, understand how to build their businesses better. And, uh, so he's really highlighting. Well, he had an incident where they have some kind of software I think they use at one of their conferences where they put their logo on it, so it's like white labeled. And, um, they went into like, re up for that software and the company just, uh, randomly added a $20,000 charge for putting, putting the logo on, as they had always done for years for free. And obviously it doesn't cost them anything to, you know, have the logo there. And, and so he's like, why are you doing this? We've been a loyal customer. They've actually referred, I think he says, millions of dollars of business probably to this company through using them and promoting them. With Saster and the, uh, head of, you know, whoever it was, a salesperson's like, I gotta, you know, we gotta charge money. We gotta charge more money. We got pressure, so we're just gonna stick it to you. That's basically what he said. So that kind of led me to realize, um, and then he goes through in the article, and it's like Salesforce is growing their, um, revenue. But it's all said. He said, I think 72% of their revenue growth is just increasing fees. It's not like winning new work value

Speaker C: add to the customer. It's just like raising prices.

Speaker A: Exactly. So a lot of these legacy SaaS vendors. Yeah, exactly. It's health care inflation, right? Um, some cases it's worse than healthcare inflation. So I think what's happening in this sector overall, because it kind of brought up to me like this is a problem just on its face, but it also is involved with AI and it's more serious than just getting charged more. It's also being prevented from using AI more effectively. So what's essentially happening is the software vendors, these legacy ones that have been around for a while, um, they're under pressure in the market because they're not growing the way they used to because AI native companies are coming in and stealing their thunder, right? And they are stuck with these sort of clunky old systems. And what they're kind of doing is slapping AI on top. So they give you that stupid little star button. You know, it's like, hey, use the AI. Yeah. Uh, no, it taunts me. It taunts me. And you press the button, you get some like, crappy model that, you know, like you have no control over what they're giving you. And then they're trying to charge you 10, 15 bucks to see more to use something that you don't use. Right? And so this is AI, uh, for these guys, right? And then meanwhile, you can go over to a product. Like we use, uh, Kik Co for accounting because we just started last year or this year. And, um, you know, it's like completely AI, uh, driven. It just like finds all the receipts, figures out what it is, you know, categorizes it. Maybe there's a little bit of correction on the back end, but not much versus, like, QuickBooks, which is a disaster. And like, they're putting AI in now. They're trying to put in agents. It's like, oh my God, like this, it's just like building on this edifice of crap, you know, that's just going to sink down into the mud. And they're charging, they're charging more for it, right? So, I mean, Intuit's one of the worst offenders of this stuff. So, um, what's happening is they're going to stick it to you because they have to, because they're losing ground every day. Their stock prices are sinking, their values are sinking. Um, and at the same time now they're trying to gate your data, put a toll booth in front of it. So they want to be the AI, uh solution that you use. Um, so for instance, Slack, which many of us use, we use, we use it, um, just like, I don't know, it was over the summer, I think they basically clamped down on third party access to Slack data. Your data. Right. And so what happened is they were keeping, A lot of people were building software that allowed you to pull out what you were talking about in Slack and run it through LLMs and understand what's happening across the company. Now for us, not that big a deal. We're like three people now. We have a few channels with outside vendors. Yeah, whatever. I mean we can switch and we're not losing anything. So I'm not, I'm not like on the barricades for us at this point. Um, although I would probably say we should switch. Um, but for a company that has like 100, you know, 50, 30, 50, 100 people, um, all talking in Slack, there's a lot of information in there that's part of understanding what's happening in the company. Plus people are starting to build like agents where they get called in Slack, so it's trying to make it into a ui. And now they're trying to get, they're trying to put a toll booth in front of that, um, to charge you to use your own data. And oh, by the way, what happened last week or the week before, uh, Slack comes out with business plus another 10, 15 bucks to build agents to understand what you're talking about in Slack. Right. So it's like, and like I haven't used it. I mean, I'm sure it's fine, but like you don't. Are they using the latest model? Do they use Claude over, over OpenAI over, blah, blah, blah. Right. You don't know. They're just giving you something. And so I think what's happening is particularly the less sophisticated companies are just getting Handed a pile of crap and charge more for it and it's not helping them. And so part of the problem with AI adoption is because of this, right? We're not getting the good solutions. And I guess what I said in the piece is the calvary is coming. The people with AI native apps are going to let you use your data the way you're supposed to. Um, they are coming, but they are not here yet. So I can't go tell you, hey, go use this other thing besides Slack, because it's so much better, because I'm sure there's something out there, but it hasn't hit mainstream yet. Right? So I, I come with a message of warning, but I have no solution for you yet. I mean, obviously Owner RX is one of the things we're trying to build, is build in, you know, give you an agentic system that helps you build and use agents in your own, um, organization and then make, make all your data more usable. Right? That's the goal of Owner rx. So we're get, we're, we're working towards that. Um, and we're going to be in alpha and probably in January and beta and February. So like, we're moving toward it, but we're not quite there yet. Um, so I think it's a really tough time for people because they're seeing like, they call AI, uh, the benefits of AI very jagged. So like it's really good at something and then really bad at the next thing. And part of it is the tools, Part of it is the models themselves, right? They're good. They've been trained on certain things and they do it really well and other things they don't. And those capabilities change over time.

Speaker C: So.

Speaker A: But also the tools that you can implement with like, I just taught this whole, uh, small M business AI for Small Business Owners class. We were just talking about it. I was like, I'm never teaching this class again because it drives me nuts. Like, it's great, but it's like people have all these problems with their company. Like, well, some people have no idea what they're doing, right? They barely even know how to use ChatGPT. Some people are more advanced. Right. It's hard to figure out before that.

Speaker B: Students in the whole range.

Speaker A: But then I'm like, hey, let's use this, uh, let's, let's start like using this coding agent in your terminal or in this. And they're like blocked by some kind of security thing at their company. I'm just like, oh my God, I can't like I can't adjudicate, you know, 20 companies, you know, screwed up policies. Right. And um, you know, so it's a little frustrating for me. I don't have patience for stuff like that. So. But it's, but it taught me is like these companies are just dealing with like all sorts of different barriers and what you'll find is that uh, for the determined owner, you can build some stuff that you can use really well. Like I got some people using codex, which is OpenAI's coding model or Claude code either in GitHub, uh, code space or on their terminal building. Agents work in the agents as a

Speaker C: result of the course, you mean?

Speaker A: Right. And others built GPTs that they can chain together and some kind of rudimentary orchestration. So we got there. With most people it was a struggle. Um, but that is really game changing. Right. And that helps you become a lot more productive. But the problem is it's like this one guy I talked to is like it's all single player, right? It's all like single player game. Like you can do it, you can do it really well. But you want to scale it to your whole organization. I uh, mean, God help you. It's you know, once you're dealing with authentication and you know, role level security for every piece of data and like who has access to what, like the tools just do not work yet. And that's coming. We're seeing Google and Microsoft take steps toward that and owner access taking steps for that. But we are not there yet. Um, and it's going to be several months before we are I think.

Speaker C: So for, for the owners who, okay, we're not there yet, you don't have a solution. But for these owners who are being gouged, price gouged and say like they have their Slack or whatever it is and they're just slapping a pro or a premium or some other p. Right. Raising prices at least you're you know, bringing an awareness to that. And, and what would you say do that in the interim until you know, we are there or.

Speaker A: Yeah, like you can't, you can't leave your ERP system today that you know, the agentic ERP doesn't or the agentic CRM, um, is coming. There are probably some versions of it out there. Right. But it's not there yet. Um, we're actually building one, I actually just architected one, the custom build over the weekend and I think we're going to be able to get it there faster than I thought. Um, but uh, yeah, I wouldn't advise people to go do that. Now what I'd advise you to do is um, depending on the kind of software. So like erp, that's going to be the last, you know, uh, enterprise resource planning. You're kind of your accounting and, and basic payment kind of stuff. That's going to be the last thing that goes right? So probably on that I wouldn't do much right now but uh, even though it's one of the most painful but uh, for like CRM I would not be signing a long term contract. I would be saying I'll pay more to keep this for a year and not any longer than that because within a year to two years there's going to be a much better solution. And if you can't move to that, if other people can move to an agentic CRM. Because think of, here's the difference in a CRM right now. You go in there and you're like okay, I have a contact database that I can put a thing in my Chrome and HubSpot will log every contact I talk to. That's great. Um, then basically every CRM is some combination of a deal flow tracker while updating the contacts with the deal flow activities and then some kind of dashboard of that. And then they might have other types of, oh, I build landing pages or those kind of things, right. That are like I put out a page to get people to sign up for something. So HubSpot will have that, some do, some don't. Right. So basically that whole like where are um, my deals and how are they going right now mostly you have people, you know, if they have Chrome extension, the emails can get registered in the HubSpot or the, whatever you have Pipedrive or. And um, you know, basically it's just a big database with the status of each deal and then the status can only really be updated at this point mostly through like manual entry a little bit with the emails. But like to change the status and stuff you got to do that human, the human's doing that. Right. And so it never gets updated and it's all crap data and no one knows what to do with it, right. And everyone's running around trying to. And then the dashboarding is a nightmare. I mean HubSpot's like a, it's like going into like a. You think like using a terminal is tough like on a HubSpot it's like, oh my, what is this? Yeah, so. Or Salesforce even worse. Right. So um, what a truly agentix system would do was it would hook into Your phone calls, it would hook into your email, it would hook into like every, your slack, all your communication channels. And it would, you'd have an agent that would like anytime an opportunity came in, it would research the opportunity, score it based on your, you know, your stuff, read your like for us it's uh, like for my company Corner alliance, we might score it against our past performance, right? Saying like do we have qualifications for this? Do we have relationships that are already registered? And then as you run the deal, it'll pull like oh, so this person emailed that person, they had this conversation and they'll take the insights from that and auto populate the database. You won't even have, I don't even think you'll have a CRM. It'll just be some database that you, where you know everything gets auto logged by agents. And then when you're like what's the status of the deals? An agent goes in and runs on it and shows it to you. And so like it'll all, yeah, it's way better. So it'll all be, and by the way it'll be sitting there telling you oh, when you, you know, you took this action. But when these kinds of things happen, um, it's 95% that you should do this next action and go do that. So it'll start telling you what to do, right. Um, and then it'll auto do lot of it, right. So it'll be like here's the email you should send, right. Based on this. We've read the client, we've read about the client, what their deal is, how they like to be communicated to, and here's a draft, you know, it'll do all that for you. I mean that's coming, that's already sort of here. Like there's solutions like Momentum AI where they're trying to build that kind of like auto populating and prediction kind of stuff into existing CRMs. But I think someone's just gonna come up with all new stuff, right? Like AI from the ground up. Uh, get rid of your salesforce, get rid of your um, you know, pipe drive or whatever.

Speaker C: What a relief that will be. Yes, Just make it there for the business owner.

Speaker A: Yeah, I mean that's what at Corner alliance we're trying to build that from the ground up for them. Um, so uh, you know, I think that's coming, right. And so, but we're not there yet. So you gotta hold out for a year or two and then you'll have it. But don't sign these like three plus Year contracts with CRM vendors. And it's not just the cost. Right. Again, just remember they're going to gouge you. Yes, but the cost pales and compare to the cost of not using AI effectively in your sales and operational processes. And uh, as people, as more AI first native companies come in and compete with you, they will not have these legacy problems. Like I, as we as Owner Rx do not have to deal with our legacy software being a hindrance right now. We can just use the new QuickBooks. No QuickBooks. We will never have QuickBooks. Well, I have to use it because of coaching, but um, we will never use it. So um, yeah, I think that's sort of the message is like we're in this weird in between space where we can see what's coming but we don't have it yet. And um, ah, the vendors know it's coming and they're kind of digging. I think they're just trying to take the last few pennies they can in front of the steamrolling that's coming for them.

Speaker C: Yeah, it's a last ditch effort for air. Right. But it's an uncomfortable space to be in for, obviously for them, but for the owners, for business owners, for entrepreneurs.

Speaker A: But when you see the difference between a truly agentic AI system and the AI button that got slapped on, it's just, it's night and day. So don't think what you're getting now is any representation of what's coming. It's not. Um, and uh, some of the magic you'll see in the future is just incredible. So.

Speaker C: Right. The little magic wand right in your Google mail is actually not magic. Like the agenda.

Speaker A: That's right. That's right. Cool. Well, I think that's that idea and uh, like it. Talk to you next week.

Speaker C: All right, talk soon. Bye.

Speaker B: You've been listening to Owner Rx with Alan Pence. Want to apply what you just Learned? Try our AI business advisor@ownerrx.com it has all the insights and lessons from this podcast, plus hundreds of Playbooks ready to solve your specific business challenges. Owner rx, stop being the bottleneck. Start being the owner.

Speaker A: If you don't want to hear, you go.