SAAS Here to Stay

"Hybrid firms need to keep their products as the engine that drives services and maintenance. They also need to look at how best to servitize their products, to find the special value and revenue opportunities, and to use services to make their products less commodity like," Cusumano said.

Ray Lane, the managing partner at venture capital firm Kleiner Perkins Caufield & Byers, said the landscape for enterprise software has changed. There are now more than 1 billion Internet users, with consumer-based Web 2.0 applications also now migrating into the enterprise.
"This has bifurcated the industry into category leaders and innovative startups, which represent less than 10 percent of the total number of companies in the software industry, while the rest are trapped in a no mans land," Lane said. But both groups have an advantage in terms of research and development. Startups have disruptive innovation and the category leaders have continuous innovation, he said. Lane said that while the notion of SAAS may sound trite, it is here to stay. "It is going to go much, much further," he said. Ray Lane believes that the U.S. software industry is losing its dominant position in the global market. Click here to read more. While companies like Oracle and SAP have included SAAS as part of their model, it has been very difficult for them to take all their product versions and the architectures with which they were built and make these available as services. "It would take 10 years to convert them all to a full services model," Lane said. Next up was Timothy Chou, who helped Oracle set up its "on-demand" business and who also authored the book "The End of Software." "We are in the midst of a huge transition and SAAS has already happened. You may not have noticed or realized this as yet, but it has," Chou said. The traditional revenue and business model for software has already transitioned, Chou said, noting that the cost for delivering software to a user for an auctioneer, such as eBay, would have cost $100 a user a month under the traditional model. That cost dropped to $10 per user under SAAS, and to just $1 over the Internet. "This move to SAAS is hugely transformative if you look at the economic implications of the shift. But we are far from done with this in the software industry," Chou said. To read more about why the SAAS route could be bumpy, click here. Specialization would be a huge influencer going into the future; games are important; and service also mattered, Chou said. "Why does specialization matter? Nobody ever had to take a class on how to use Google as Google set out to do just one thing: search. So, specialization has huge implications for how software is designed and delivered in the future," he said. In the future, authors will write specific, specialized, localized software. "Did you know that Citibank has more programmers than Oracle? The future looks like tons of vertical, specialized applications," Chou said. Service is important as it is the discovery of known information. "The information is there. The surface Web, what you see and find on Google, is 100TB. The deep, deep, deep Web, which includes proprietary corporate knowledge, has more than 1 million terabytes and, so, new ways are going to have to be found to make this available. This is an amazing amount of information," Chou said. Going forward, innovation will come from places we have not yet seen. "We are somewhere between infinity and beyond," Chou said. Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.