So suggests Forrester, as reported by ReadWriteWeb, which has them suggesting that some Enterprise 2.0 web applications are in for a shake-up which may cause their pricing to fall over half the current rate. The article calls out blogs, wikis, and social networking software (what are blogs and wikis?) in particular as items subject to commoditization and pricing pressure. Mashups escape the trend, forecast to increase in price over the next five years.

But my question is, can these services really drop in price that much and remain in business? Margins, we've already heard, are considerably more thin for SaaS companies than traditional boxed software companies. Can they really afford to stay in business while dropping their pricing so much?

I'm making a bit of an assumption here, that Forrester is talking about SaaS variants of these software packages rather than in-house alternatives, which there is also a market for. Part of what is grounding that assumption is that if you are a cost-conscious buyer, you're probably looking at the SaaS version first anyway; the margins on SaaS are worse in part because they are subsuming the operations costs which otherwise would be borne by the customer in most cases. The other part of the assumption is that the pressures that Forrester is talking about really only seem to apply to the SaaS space. While you could argue that operating systems, office applications, and the like have been commoditized over the past decade and faced their own pressures from free alternatives, there has been no significant drop in prices there. That's due in no small part to product lock-in, but that factor exists whether you have deployed an office application system or a blogging platform in-house.

It seems a safe assumption that pricing will drop somewhat in the SaaS space as the industry pioneers find more efficiencies in their business models and as more realistic alternatives spring up on the market, but I question whether the degree will be as great as Forrester seems to be predicting.