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Money Matters in Software Product Image

Money Matters in Software

  • ID: 562527
  • September 2007
  • 16 pages
  • Ovum

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
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

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