Wel come
As with many things in the technology field there have been many words to describe the same thing; or one word that describes many things. Software as a service, software on demand, managed services, software and services, subscription business, hosting are just a few terms that have been used to describe a variety of different concepts. This article is an attempt to rationalize all of the models for software into seven fundamental business models.
Amy Mizorus Konary, at International Data Corporation (IDC), and one of the earliest industry analysts to follow the change to software delivered as a service, cites five major areas that cost companies millions of dollars annually. "CIOs and their departments really focus on five key aspects of the management and maintenance of their computer and software systems: availability, performance, security, problems, and change management." The implications of this are substantial. First, CIOs' budgets are dominated by spending on managing software, leaving little money on the table for new programs and projects. In our example, while the price of the software may be $ 4,000 per user, the customer will end up spending $ 1,300 per user per month to manage the security, availability, performance and upgrades to the software.
Model One has been a powerful business model. Webex founder Subrah Iyar lectured at Stanford in 2006, and said "I would much rather have built a software business on the traditional model-it's a much better business model for the software company." It is particularly good since, with the large up-front purchase of the software, sales and marketing expense, which typically can run thirty to forty percent of revenue, can be funded. The license business will typically be break-even, and the profit will be realized from the software support business. Software support or maintenance typically consists of break-fix; access to usage information and the rights to the continued development of new software. Anyone who buys packaged software should appreciate they are not only buying what the software does today, but also the continued refinement and enhancement of that software for the future. It is, of course, in the software company's interest to move customers forward on new releases so as to not incur great expense in supporting multiple releases of the software. In the early stages of any software company, this is mutually beneficial, as the customer needs and wants future functionality and, in many ways, that's why the consumer chooses to buy versus build.