[mamonster]

Tl; dr thing you should keep in mind(and this will happen to every SaaS): 1.5 mio in revenue per employee.

Your SaaS vendor will hike prices or fire people until they get to this number. Why ? Because VC/Wall Street told them that if they want a Meta/Apple/Microsoft like valuation or a good upround they need to hit this key metric.

Over the next 2-3 years every SaaS that is priced by some sort of market(so not passion projects/ projects run by guys who don't look at comparables) will at least try to hit the above metric. Whether that is massively laying off people(ring any bells?) or massively hiking pricing depends on the product in consideration.

The era of "profitable customer" is over. Now it's all about how profitable he is, and 1.5 mio in revenue per employee is the benchmark.

[alephnerd]

While i agree in broad strokes, this isn't exactly related to upping revenue per employee.

This sounds like a mis-tiering of an upper market or strategic account by an account team.

That said, Margins and RPE are critical now.

A lot of this is also because there are too many damn SaaSes now, and enterprise products bill monthly now as well.

In 2013 the average was 8 SaaS products per company and in 2023 around 80 (I can't remember the blog link I got this from but it was a fellow VC or CRO who pointed this out).

There isn't as much money floating around anymore as everyone is at their limit, and it's getting ridiculous to spend a couple hundred thousand on some random SaaS that's unneccesary.

[mamonster]

I think in this particular case you are probably right(you see much more experienced in actual enterprise sales), but I think my more general point is that these sorts of price hikes are what is priced into this business now.

VMware was bought at about 400k rev/employee, Broadcom was running at about 1.7mio per prior to that. Tan is essentially running a PE buyout shop that is listed, and he uses a lot of leverage. He might not get it to 1.5 mio but he wouldn't have bought it if he thought it could churn out anything less than like 1.2(over 6-7 years).

[alephnerd]

> these sorts of price hikes are what is priced into this business now

Pretty much.

> Tan is essentially running a PE buyout shop that is listed

I'd disagree on that. A PE play would severely underpay engineering and look for a short (2-3 year) turnaround by re-IPOing. Meanwhile, Broadcom tries to hold portfolio companies and pay AWS level salaries to hires.

Instead, Broadcom is using the same strategy that PANW and ZS are mimicking to own the F100 market.

There is severe vendor fatigue in the market, as various different apps are viewed as a massive cost inefficency and there is a very real chance of different apps becoming an attack vector (eg. Slack at Uber).

The only solution for this is vendor consolidation, as this

1. Limits the amount of RFPs you need to vet significantly

2. Narrow down any spending inefficiencies

3. Limits your attack vectors with a vendor breach or compliance overheads

This is why Niklesh Arora announced "Platformization" at PANW's earnings call a couple days ago, and is the same strategy Broadcom has been using for almost a decade, and what ZS+CRWD have started using as well.

This is a demand from F1000s now as well as institutional investors, and a massive reason why Broadcom's stock has gone from $40 to $1300 in a decade.