The 4 trillion dollar IT market is ready for its GameStop moment
Meet the startups coordinating collective action to disrupt pricing for SaaS, cloud services, and data storage
Information Technology (IT) is filled with closed markets, while open markets fill our everyday life. Startups are harnessing the same 3 ingredients from the GameStop Short Squeeze of 2021 to bring open markets — and huge price corrections — to corporate IT.
In the technology world, most buying and selling occurs in closed markets. Sure, if you buy a single laptop, you hit “Buy” on apple.com and a box arrives— in the corporate IT world, where most of the 4 trillion dollar IT market spend occurs, no one pays retail.
- SaaS, cloud, and data storage vendors sell at an artificially low price, based on the degree to which a customer is likely to become locked in by adopting the product and filling it with data
- Once locked in, customers have no control over future price. The vendor can raise prices and even force dramatic changes on their customers — like moving to the cloud
- After paying dearly, companies dedicate teams to study alternatives to compare and gain better prices. Companies using Slack may try out Discord, they may compare their AWS costs to Google Cloud, etc.
Time passes, purchases are eventually made, and there is weeping and gnashing of teeth.
For large corporate deals, SaaS, cloud, and data storage platforms are closed markets — only buyer and seller know the price paid. Both sides spend effort to get the best price. Since no company wants to overspend, all IT managers must plan, research, negotiate and deal-make to optimize their spending.
The price gaps for large IT platform purchases are unbelievably huge. According to NPI, one of the oldest firms to track corporate tech spending:
The painful truth is, over the next 12 months, enterprises will overpay for 75% of their IT purchases because the category is notoriously inconsistent in pricing and terms.
Tech platform vendors know locked-in companies must renew regardless of price; however, the price they charge varies across customers — and no one knows what anyone else pays.
Open markets, open prices
Price is opaque in closed markets. In everyday life, we’re used to transparent pricing in open markets:
You want some apples? You visit the grocery store and the price listed is what you pay. If you don’t feel the price is fair, you visit a different store.
You want a house? You look online, you look with an agent, you make an offer based on similar home sale prices. If the seller accepts your offer, then (eventually) the sale price is made available to the public.
In an open market, buyers and sellers get a pretty good price.
GameStop — power to the buyer
The GameStop Surge shows what happens when an open market receives new data. In that case, /r/wallstreetbets profited from information previously available (at large expense) only to the closed world of large trading firms.
What made it possible?
- New access to data
- Awareness of an action to make $ using that data
- The madness of crowds
In the stock market, everyone knows what everyone else pays. The price surge in GameStop (GME) is what happens when everyone knows who is short.
The daily reddit screenshot posts of data on short interest in GME from S3 Partners— versus the weeks-long delay for public data — enabled a simple investment thesis  to spread via Reddit. The crowd went wild for the winning trade, they liked the stock, and the event impacted price discovery across the market.
The daily GME short interest screenshots on Reddit were a catalyst for collective action. When investors saw data evidence (screenshots!) of >100% short interest, they felt confident to buy the stock. It is doubtful the GME rally would have spread to millions without this evidence to back up the trade.
Startups bring new information on IT platform costs
Startups are harnessing the 3 ingredients of the GameStop Surge to introduce price transparency to the $4 trillion IT market:
- New access to data
- Awareness of an action to save $ using that data
- The wisdom of crowds
These companies — let’s call them Market Openers —such as DuckBill, Capiche, and Storage Cost Analysis introduce awareness of vendor lock-in practices, collective price intelligence, and anonymized market metrics and analysis  to closed IT markets.
Just as screenshots on Reddit distributed new data on short interest, these services provide new data to locked-in corporate customers of SaaS, cloud, and data storage platforms.
Market Openers help buyers see open prices in closed markets. And as these services become popular, they impact price discovery.
As the IT crowd’s collective wisdom opens up tech markets, few companies will be willing to spend more than their peers on SaaS, cloud, and data storage platforms.
Will corporate IT become an open market slowly — or all at once? The surge in GameStop’s price occurred within several days in 2021, yet the collective action — buying the stock, posting screenshots and memes — was building since mid-2019 on /r/wallstreetbets.
Likewise, there is growing awareness of price absurdity in corporate IT.
- Many message threads on Hacker News discussing vendor lock-in and tips to get fair pricing
- Last month, the NYTimes wrote a profile on Corey Quinn from Market Opener firm Duckbill
What will collective action from IT buyers look like? Perhaps when IT deal tendie memes appear on social media, the collective moment will have arrived.
 if short interest >100% → go long
 full disclosure: Storage Cost Analysis is my service