Wednesday, 27 August 2008

The downside of SaaS

Can I commend you to read the excellent article by Richard Walters in today’s FT – The end of the software gravy train. You will have heard the theme many times on HotViews. SaaS is an unstoppable train but it will be extremely damaging (at least in the short/medium term) to today’s software players who rely on upfront software product licence revenues + forever recurring maintenance and support. SAP and Microsoft are amongst those with most to lose. Even the new upstarts – like – are having trouble making the SaaS model work from a financial performance viewpoint.

It all has echoes, for me, of the BT ‘problem’ with Broadband in the 1990s. If it rolled out Broadband it would hit its extremely lucrative ISDN revenues. If it did not, competitors like the cable operators would eat their lunch anyway.

As I will be saying in my Revolution presentation in September, we have reached a similar tipping point. Embracing a new modus operandi is much easier without past baggage. Changing existing models is damned difficult. History shows that this is often when “The first one then will later be last”. I think the next few years are going to be extremely difficult for the established software players – and therefore extremely interesting for us analysts and users!

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