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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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The Pendulum Swing of Software Economics
The SaaS industry is witnessing a fascinating economic evolution. After years of companies building comprehensive all-in-one platforms, we're now experiencing what industry analysts are calling "Unbundling 2.0" – a strategic disaggregation of software services that's reshaping how businesses buy, implement, and leverage technology solutions.
This isn't the first time we've seen such a shift. The 2010s witnessed the initial unbundling of legacy software into specialized cloud-based tools. Now, even those specialized tools are being deconstructed into more focused, modular offerings. Understanding this cycle is crucial for SaaS executives navigating today's competitive landscape.
From Monoliths to Microservices: The Historical Context
The first wave of SaaS disruption involved breaking down on-premise software behemoths into focused cloud alternatives. Companies like Salesforce, Workday, and ServiceNow challenged incumbent enterprise solutions by offering specialized tools with cloud-native advantages.
According to Bessemer Venture Partners' State of the Cloud report, this initial unbundling created over $1 trillion in market value between 2010-2020 as organizations eagerly adopted these more agile, purpose-built solutions.
The 2010s saw an explosion of specialized SaaS tools:
- CRM platforms replacing spreadsheets and custom databases
- Marketing automation tools replacing manual campaign management
- HR platforms replacing paper processes and disconnected systems
- Financial software replacing desktop accounting programs
Each category flourished by focusing on doing one thing exceptionally well. However, as these categories matured, many platforms began expanding their footprints, creating the foundation for today's unbundling wave.
Why Unbundling 2.0 Is Happening Now
Several converging factors are driving this new wave of unbundling:
1. Platform Bloat and Complexity
As successful SaaS platforms expanded their offerings to drive growth, they inevitably added complexity. What began as streamlined solutions evolved into feature-rich platforms that, while comprehensive, often became unwieldy.
According to research from Productiv, the average enterprise now maintains 371 SaaS applications, yet employees only regularly engage with 30-40 of them. This suggests widespread feature underutilization within bloated platforms.
2. Economic Pressure and Budget Scrutiny
The economic headwinds of 2022-2023 forced organizations to scrutinize their software spend. CFOs began questioning the value of comprehensive platforms when only a fraction of features were being actively utilized.
A recent OpenView Partners survey found that 82% of SaaS companies have experienced increased scrutiny on ROI during renewal conversations compared to previous years.
3. Rise of API-First Architecture
Modern software development practices have made integration significantly easier. The proliferation of robust APIs, integration platforms, and no-code tools means companies can now assemble best-of-breed solutions without the integration headaches of the past.
According to Gartner, by 2025, 70% of new applications developed by enterprises will use low-code or no-code technologies, up from less than 25% in 2020.
The New Categories Emerging from Unbundling
This unbundling is creating exciting opportunities for focused solutions in previously consolidated spaces:
Marketing Suite Fragmentation
The comprehensive marketing clouds offered by Adobe, Salesforce, and HubSpot are being challenged by specialized tools:
- Email marketing platforms like Customer.io and Klaviyo
- Customer data platforms like Segment and mParticle
- Content optimization tools like Optimizely and VWO
- Social media management platforms like Buffer and Hootsuite
HR and People Operations
Workday and other comprehensive HR suites are seeing modular alternatives gain traction:
- Specialized recruitment platforms like Greenhouse and Lever
- Learning management systems like 360Learning and Docebo
- Employee engagement tools like Culture Amp and Lattice
- Performance management platforms like 15Five and Reflektive
Financial Systems
Even notoriously integrated financial systems are experiencing unbundling:
- Expense management tools like Expensify and Ramp
- Billing and subscription management platforms like Chargebee and Recurly
- Revenue operations platforms like Clari and Gong
- Treasury management tools like Kyriba and HighRadius
The Business Models Driving Unbundling 2.0
Unbundling creates multiple business model innovations:
1. The "Wedge" Strategy
Rather than attacking incumbent platforms head-on, startups are identifying underserved capabilities within comprehensive platforms and creating superior, focused alternatives. These "wedge" products solve a specific pain point exceptionally well, then expand into adjacent areas.
Notion began as a simple note-taking tool before expanding into a collaborative workspace platform. Figma started as a focused design tool before becoming a comprehensive design system platform. Both used a narrow focus as their entry point.
2. Modular Pricing and Packaging
Unbundled solutions are embracing transparent, modular pricing models that allow customers to pay precisely for what they need. This contrasts with the often opaque, bundle-oriented pricing of comprehensive platforms.
According to OpenView Partners' SaaS Benchmarks Report, companies with transparent, usage-based pricing models demonstrate 38% higher net dollar retention compared to those with traditional subscription models.
3. Verticalization
Many unbundled solutions are taking their specialization further by tailoring their offerings to specific industries. For example, Veeva has unbundled CRM specifically for life sciences, while Procore has done the same for construction management.
Integration: The Critical Challenge
The success of Unbundling 2.0 hinges on seamless integration. Previous unbundling waves often created data silos and workflow fragmentation. Today's successful unbundled solutions must prioritize:
- Native integrations with complementary tools
- Open APIs that allow custom connections
- Workflow automation capabilities to maintain process continuity
- Unified data models that prevent fragmentation
Companies like Zapier, Workato, and Make (formerly Integromat) have built substantial businesses solely focused on connecting unbundled tools. Meanwhile, platforms like Segment and mParticle are ensuring data consistency across fragmented marketing stacks.
The Customer Perspective: Benefits and Challenges
For enterprise customers, Unbundling 2.0 offers compelling advantages:
Benefits:
- More precise feature-to-need alignment
- Reduced overall costs by eliminating unused capabilities
- Access to best-of-breed solutions for critical workflows
- Greater flexibility to adapt as needs evolve
Challenges:
- More vendor relationships to manage
- Potential integration complexity
- Training requirements across multiple platforms
- Security and compliance concerns with multiple vendors
Will Rebundling Follow Unbundling 2.0?
If history serves as a guide, today's unbundling will eventually lead to rebundling. The most successful unbundled startups will likely expand their offerings through both product development and strategic acquisitions.
According to Andreessen Horowitz, we're already seeing signs of this in areas like revenue operations, where point solutions for sales, marketing, and customer success are beginning to converge into integrated RevOps platforms.
Strategic Implications for SaaS Executives
For SaaS leaders navigating this evolving landscape, several strategic considerations emerge:
For Established Platform Providers:
- Evaluate modular pricing options that allow customers to purchase only what they need
- Invest in superior developer experiences and open APIs to maintain platform centrality
- Consider spinning out specialized capabilities as standalone offerings with dedicated focus
- Double down on workflow orchestration to maintain the "system of record" status
For Emerging Unbundled Solutions:
- Focus relentlessly on solving a specific problem better than any incumbent
- Build with integration as a first-class requirement, not an afterthought
- Develop clear ROI models that demonstrate the value of specialization
- Consider partnership strategies with complementary unbundled solutions
Conclusion: Embracing the Cycle
The unbundling-rebundling cycle is a natural evolution in software markets. Today's Unbundling 2.0 wave represents not a failure of comprehensive platforms but rather an opportunity for innovation, specialization, and customer-centric solutions.
The most successful SaaS executives will recognize this pattern and position their organizations to capitalize on it, whether by unbundling their own offerings or by creating superior integration experiences that bring unbundled solutions together seamlessly.
As we move forward, the defining factor will not be whether a solution is bundled or unbundled, but how effectively it solves customer problems and integrates into their broader technology ecosystem. The winners of tomorrow will be those who embrace this reality with strategic foresight rather than resisting the inevitable pendulum swing of software economics.