We recently covered in this blog,upstart companies making headway with subscription model and we saw reactions form various segments-both in support and against.I believe enterprise software segment may be largely unaffected as anyway customer pays heavy maintenance fees.I definitely feel that there is a silent revolution happening in the IT world. Subscription based software selling shall definitely move into mainstream – with telecom infrastructure and early adapters of subscription model players showing satisfactory results. As this article points out, the pace of technological advancement means a business can't stay put: It either spends more to keep its IT infrastructure as good -or it falls behind the competition.
The landscape has begun to change with the emergence of pay-as-you-go schemes in which computer infrastructure gets leased. Some offer a subscription model, others treat it on a per-use basis but the idea is essentially the same. Instead of paying for an expensive computer infrastructure, companies remain current with the newest technology by offloading the chore to any of the growing number of would-be candidates angling for the business.
This concept was updated for the era of distributed computing with the advent of grid infrastructures and various software-as-a-service models.It's too soon to tell whether this idea will set the computing world on its ear, but it could prove to be a harbinger for the industry-if it's a success.
As Ed Sim poins out in a recent post,It is hard to believe that CISCO which once had a market cap company at $600b is now potentially a great value play. The hot growth sector these days is energy and now Exxon Mobil is the largest market cap company at $400b.The P/E ratios (range from 18.7 to 19.6)of the tech giants like Cisco, Microsoft, Intel and Oracle are equal to or less than non-tech large caps like J&J, Wal Mart, and Coca Cola (range from 19.4 to 21).In fact, Cisco's 2005 P/E at 17 is less than that of the S&P 500's at 17.4. When most people think tech, they think high growth but this chart and these P/E ratios should really bring us back to earth. Larry Ellison's assertion a couple of years ago that the technology markets are maturing, seems to be right. That is one of the reasons we see all of these huge mergers happening as companies seek to expand their markets, their product lines, and revenue.
We also covered the viewpoint Bandwidth is microsoft’s enemy,wherein we wrote,"In a world of unlimited bandwidth and remote applications, the operating system doesn’t matter, and this is why bandwidth should scare Microsoft more than any other company". Add desktop applications – like Microsoft office to the list –and it easy to see that definitely fundamentally altering changes are happening in the IT industry and fast moving changes shall happen in the desktop segment and shall move on to cover all IT segments.