Ask HN: Are Software Companies Just Selling to Each Other?

[jerawaj740]

I’ve been thinking about how much of the SaaS world feels circular, software companies building products and services, but their main customers are often other software companies, from dev tools to cloud hosting to analytics. are software companies mostly just selling to each other, and if so, what are the long-term effects?

[bix6]

https://www.ycombinator.com/blog/announcing-yc-deals

And

There really is no counter-theory. “The knock on YC,” Andy Weissman, a managing partner at Union Square Ventures, told me, “is that on Demo Day their users are just YC companies, which entirely explains why they’re all growing so fast. But how great to have more than a thousand companies willing to use your product!”

https://www.newyorker.com/magazine/2016/10/10/sam-altmans-ma...

[potamic]

Sure, any significant business depends on a lot of software. As a software company you don't want to build that which is not in your core business, so you would buy a lot of other software. But the reality is a little more insidious. Investors are mostly selling to themselves. Every time an investor invests in a company there is a push to partner up or avail services from other companies their portfolio. Even if it's not the best choice for the company at that time, investors are more interested in strengthening their overall portfolio.

The long term consequence of this is that as capital gets concentrated into fewer and fewer hands, so does the means of production. If you are outside the network you will find it very hard to sell your services even if you have a better product. This already happens in many places with wealth disparity. Deals simply do not happen without the "blessing" of a wealthy backer. Software is unfortunately moving that way. The once upstart nerd who was able to launch their business from the basement has turned into the technocrat baron who will keep such a thing from happening again.

[dtagames]

Yes, especially in SaaS. Every company that offers one uses 30 others internally.

The long term effect is that, owing to the costs of the compute hardware all this runs on, all of these services become profit centers for Google, Amazon, and Microsoft who control the cloud services backend world.

[madamelic]

Yeah, I mean, not to be a complete a-hole but isn't that what an economy is? All of us just selling to each other in an infinite circle.

It's all made-up.

[seydor]

Yes but still their value keeps increasing because of general demand by every other industry. Car companies also sell (parts) to each other