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Monday, January 16, 2006
Enterprise Software : Emergence Of Disruptive Models
I wrote a brief piece for Sandhill about the internet ecosystem disrupting the growth of the enterprise software segment. The Year 2005 saw a shrinking of the market cap of the software sector stocks - fewer listed companies exist today than was the case twelve months back. Despite oracle's massive acquisitions & encouraging financial results, the stock is trading at its 15 year low P/E levels. Almost all the major software vendors barring a few shed huge market caps in the last twelve months and in the case of big vendors, the losses have been precipitous, despite showing healthy financial measures. Amidst all this, it has to be recognized that the software industry is changing in ways more basic and fundamental than ever seen. Going by past trends, there should be a next wave of growth that is looming large that the industry can go after/co-create and benefit. Today, reality looks different - a near stagnant growth and flat trends are being experienced. Enterprise software industry is forced to look at a pricing structure from an outcome based pricing as against cost plus models practiced today. The next stage of the internet's impact on the industry could also fuel a very dramatic change that could engulf the sector in the coming years. Fragmentation, nichiefication & consolidation shall characterize the growth of the industry. Obviously different players in the vastly heterogeneous enterprise software segment shall cope with the changes at varying paces. Every sizable enterprise software vendor would be subjected to traditional dynamics of competition and growth - while there shall arise a newer set of players leveraging the disruptive factors. The traditional vendors shall pursue a course of merging or acquiring companies to achieve the size and economies & move towards achieving "platform status" aimed primarily at marginalizing competitors, while the new set of players will fight existing vendors aided by disruptive, internet-powered dynamics. The two models shall increasingly compete. The Internet-based disruptors shall be focusing on tuning/perfecting their ecosystem around more innovation, while the traditional vendors shall be focusing on restructuring / realigning their ecosystem as a required defensive move. While it may be unclear as to how the potential mutation/morphing of the industry structure may lead to at the end, it is not to be disputed that a much more glorious future filled with growth awaits the enterprise software industry. Read the full article here.
Category : Emerging Trends, Emerging Technologies, Enterprise Software |
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