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Monday, August 23, 2004

Corporates pursuing cheapware via Forbes

Corporate customers are fed up with high software prices and are convinced they're getting less for more. Some are switching to cheapie alternatives. A lot more of them are threatening to do so.The trend is so powerful that,the future will be dreadful for software vendors like IBM, Microsoft and Oracle. Customers will balk at ever-escalating prices for mainstream products and will opt whenever they can for bargain-basement software based on freely available code such as MySQL or the Linux operating system.The chief technology officer at Sabre Holdings, which runs the world's largest airfare and ticketing network, Craig Murphy has spent millions of dollars on database and other software from companies like Oracle. But last year, when Sabre was building a new computer system for online shoppers, Murphy took a flyer on a database program from a little-known company in Sweden that charges only $495 per server computer, versus a $160,000 list price for Oracle. Guess what? The Swedish stuff works great. Fired up, Murphy is hunting for other places to use the cheaper software, called MySQL."We're just not going to pay license fees for those databases like we used to. We'll download free stuff off the Internet before we do that," Murphy says that "this is the future of computing." Software is not rocket science. It's a commodity. The business has been overglorified for 20 years says MySQL executives.Venture investors are pumping millions into new low-cost providers, encouraged by the success of cheapware pioneers like Salesforce.com and Linux distributor Red Hat, which boast market values of $1 billion and $2.6 billion, respectively. Software now claims a fifth of the $960 billion the world spends annually on computer systems, up from one-tenth of a $464 billion pie in 1990, according to IDC, a market researcher. Hardware sales dropped from $460 billion five years ago to an estimated $365 billion this year as hardware suffered commoditization and ruthless price-cutting from suppliers like Dell. Now it may be software's turn for some pricing pressure Other big corproate names that have recently embraced cheapware include,FedEx, Ingram Entertainment, Lufthansa, NASA, Omaha Steaks, Sony, Suzuki and UPS. Clearly, cheapware trend is out to explode in a big way in the days to come.

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