Money Matters in Software
Ovum, September 2007, Pages: 16
While architectural and technical debates are interesting, they are not the most significant factors in the future of the software and IT services industry. The most significant issues are non-technical, concerning licensing, pricing and finance. The way that companies tackle these issues will influence which software vendors remain financially viable in the mid-term future. This report sets the agenda for us in the licensing, financial and pricing arena, which is changing the financial structure of the industry.
Key messages
Licensing: open source becoming a significant threat
Pricing: customers want more cost predictability
Finance: move towards services will cause fundamental financial transition
Software vendors must respond to these threats
The challenges
Traditional financial structure
Product sales
Professional services
Product support
Key issues
Emerging structures
Subscription or annuity pricing
Alternative support models
Open source
Licensing
Software as service
Transition: issues and solutions
Financing and leasing
Pricing transition
Computational markets
Table of figures
Figure 1 Professional service positioning
Figure 2 Quarterly predictability: SAP
Figure 3 Quarterly predictability: Oracle
Figure 4 Financial tensions
Figure 5 Total revenues gained over ten years: two scenarios
Figure 6 Project financing and benefits management
Figure 7 Base assumptions
- Oracle
- SAP
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