|By Hollis Tibbetts||
|April 9, 2012 11:30 AM EDT||
The age of Software is coming to an end. And I'm glad. It's not that software will disappear forever, but increasingly, it will be difficult for software vendors to compete against "Software as a Service" business models.
I've worked for software vendors for most of the past 25 years and, possibly, I'll never work for another one.
My focus as of two years ago is SaaS and Cloud. And for those who believe that SaaS is Software - I politely disagree.
Software is a one-time purchase event - the large upfront cost of a software purchase is a "sunk cost" - it cannot be recovered. Unlike a bad used car, defective software can't be "traded in" or sold.
SaaS and Cloud are ongoing relationships that get renewed (and hopefully expanded) every month (assuming that the relationship is successful).
Note that I'm distinguishing between the two based on business models - not technology. Technology is a whole separate issue, and I'd prefer not to mix the two up.
The Nature of SaaS and What it Means for Software
I had a great conversation recently about the nature of SaaS and how it differs from traditional software with Jeff Yoshimura, VP of Marketing at Zuora.
Zuora is a SaaS-based platform for managing and automating billing and payments for the subscription economy. Their tremendous success is evidenced by their recent massive $36 Million funding round and a valuation rumored to be upwards of $500 Million. Additionally, Zuora was just recognized by AlwaysOn as 2012 OnDemand Company of the Year.
Jeff pointed me to an article in Forbes written by Zuora CEO Tien Tzuo entitled "The End of ERP". It's a great article - and it got me thinking about a half-written article I started some three months ago and never finished. It was tentatively entitled "Why I'll Never Buy Software Again" - not the best title, but it gets the point across. Getting that article done is now considerably further up on my to-do list.
Tzuo's article gets it right - referring to a fundamental shift from a "20th century product-based ‘buy once' economy to a 21st century services-based 'Subscription Economy' centered around recurring customer relationships". Also check out Dan Woods' article in Forbes (which features Tzuo) - "How the Subscription Economy will Change Your Business Applications"
And that is why the era of Software is coming to an end - Software can't compete with services-based solutions. Software is focused on "closing the deal"; whereas SaaS and Cloud are focused on building recurring and lasting customer relationships.
This makes me happy - as it is good for the market and for all consumers of "software services".
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