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Thursday, April 07, 2005

Jeff on SaaS

Jeff sometime back wrote,"color me underwhelmed by subscription pricing models". Whether or not you take a large upfront license fee and a 20% maintenance agreement, or combine the license and the maintenance and spread it ratably over 3 years... it's all the same thing. For a lot of this stuff the switching costs are still prohibitively high, and for others you would have to question the relative value being created. It's definitely a trend, and a good one because it aligns the software vendor and the customer in a shared risk model and certainly makes customers feel better about the budgets they are allocating to IT. In a recent Sandhill Blog, he writes, "just like client/server meant different things to different vendors in the mid 1990’s, software-as-a-service has many definitions that the market will sort out in time and that there is no right or no wrong definitions at this time & software-as-a-service is as much a change in the perception enterprise customers have about what software is as it is a technology or business model disruption for vendors".

So if software-as-a-service isn’t simply delivery of application functionality to customers, is it subscription software, which in itself is limited to the manner by which a company charges a fee for their products? Perhaps, and if any one thing is crystal clear about this theme it is that enterprise customers are increasingly viewing software as a provided service and in many cases they want the freedom to discontinue the service if it no longer provides value to them. Jeff concludes,that we are seeing a fundamental change in our industry that goes beyond technology. The software-as-a-service movement is as much about the perception of what software is in the eyes of the typical enterprise customer, and the nature of the relationship they wish to have with their vendors. Interesting - we shall see related writings covered on this theme in the days to come.

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