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Tuesday, March 01, 2005

Software Sold By Subscription Over Internet Goes Mainstream

( Via Siliconvalley.com)The slingshot software war - Upstart companies are challenging the industry giants in a hot new market: on-demand software.It's offered as a subscription over the Internet rather than as installed software. Some perspective from key players:

- Zach Nelson, chief executive at NetSuite: Even if big companies throw 1,000 - or 1 million - software engineers "into developing software similar to his -It will take them six years to do this."
- Greg Gianforte, founder of Right Now Technologies, declares that the Oracles and SAPs of the world are "dinosaurs" because they sell installed software.
- Marc Benioff, CEO of Salesforce.com, has declared a revolution with his "End of Software" advertising campaign.
It's New Software vs. Old Software, with the new going mainstream. And it's part of the "utility" computing movement in which technology - processing power, data storage or software - is provided in the way power or water is delivered. This could be the future of the industry," according to Ray Lane, now a partner at venture capital firm Kleiner Perkins Caufield & Byers. Larry Ellison beleives -"It's a very important trend in the industry." Siebel Systems, the leader in customer relations software, has made a move into this market with its Siebel OnDemand service.

The subscription software could be a good hit with the small and medium-size companies. "This is the last great software growth market," - Mr.Nelson feels. The technology promises to reduce the headache - and heartache - for companies buying complex software packages. Customers pay regular fees. There are no long-term contracts, no hiring of consultants or in-house tech specialists to run the systems. "It shares the risk with the vendor," Benioff said.Subscription software services, though, have limitations, observed Joe Galvin, vice president of research with Gartner Research. Larger companies won't be able to get the customization, variety of functions and ability to manage complex data that they would through installed software. "It's a solution, but it's certainly not the solution,"Galvin said.
Some of the best minds in software, though, believe this is the wave of the future. But Gartner's Galvin said, "Large software companies can't sit back and watch their software prospects go to an on-demand solution and expects large technology providers -Oracle, SAP, maybe even Microsoft - to respond in some fashion."
My Take : Interesting - We beleive that in the next three to five year time horizon,medium and large enteprises would continue to own their own applications, logic and data while small enterprises may adopt this in decent numbers. There are no independently proven industry estimates about switching costs from owned software to subscription software and also the costs of reconfguring applications after beginning to use the subscription software and exit costs..

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