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Saturday, March 19, 2005

The Inevitable Rise Of The On-Demand Era

Enteprises are beginning to shift from software licenses to on-demand programs over the Internet. Mark Templeton,CEO of Citrix, is betting that high-speed wireless networks will allow access to any piece of information anytime and anywherethis has the potential to change the world.In the "on-demand" world, users pay software companies periodically to allow access to everything from office computer files to vast music libraries such as Rhapsody. On-demand pushers would like to emulate the utility business, which charges its customers monthly for electricity, water and phone service. Cable television is another corollary they invoke. The idea is that customers would rather subscribe to software programs over the Internet than pay for a license for each individual computer. They could do so without the upfront costs and receive upgrades for free. On-demand and Internet software companies would count on recurring nickel and dime compared to millions in sale of enterprise software. That mind-set is causing an upheaval of business models.
Microsoft’s Darren Huston, said he's not sure companies are willing to give up control of their software to the seller's servers. Software in the on-demand model resides in the software company's server in a remote data center and is accessed via the Internet. In the license model, software is stored on a desktop computer or a server at the office that is accessed through an ethernet connection. As business software can be so data-heavy, a high-speed Internet connection is a necessity for on-demand programs to fly. As more people have bought these connections, subscription software has a chance to flourish.
We recently covered the viewpoint Bandwidth is Microsoft's Enemy- In a world of unlimited bandwidth and remote applications, the operating system doesn’t matter, and there’s no lock-in. In such a world, Microsoft loses its monopoly, and the consumer wins. This is why bandwidth should scare Microsoft more than any other company. Proving the viability of the phenomenon is the launch of Adobe to provide software on demand. we also covered recently Kleiner Perkins partner Ray Lane's view about change in pricing or business model, and the emergence of software as a service and its inevitablity, in fostering fundamental shift in enterprise software culture.
The OnDemand model factors in shifting structures in market and their impact and differences protecting the players from the discount schemes played in more traditional software. OnDemand market is still a nascent and fast growing market, providing potential for very high growth. With a subscription pricing model of priced –to-sell customers are saved from upfront investments . As the revenue stream is single stream – predatory pricing in anticipation of future revenues form multiple streams like support and services simply may not exist or exist in a very limited manner. In the near future, on-demand may not provide discount to gain marketshare but may grow significantly and eventually provide substantial competition to enterprise software vendors on equal footing.
Category :ondemand, emerging technologies.

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