Gabbert said he expects these trends will continue through the year and should produce total venture capital technology deals worth more than $20 billion in 2004. The total number of closed deals should range between 1,800 and 2,000 this year, which would be the highest since 2001, he said. However no one foresees a return any time soon to the outlandish investment rates of the bubble years when in the year 2000 alone venture capitalists closed 6,242 deals worth more than $94 billion.Renting software online through subscriptions has major appeal to enterprises when they want rapid access to such applications as customer relationship management software, but they dont want to make a substantial cash or management commitment to it, said Stewart Alsop, general partner with New Enterprise Associates, a venture capital firm based in Menlo Park, Calif. But this has its disadvantages. "Customers have so little loyalty and so little commitment" to subscription software that they can "pull the switch and walk away whenever they want," Alsop said. This factor "is scary when you are investing in software companies," he said. However, Salesforce.com in particular has validated the software subscription model, and this has attracted venture capitalist interest. But "I dont think that the license model for software sales is dead," Alsop said. "The license model still works when you need to get an entire organization committed" to using a particular software package. However, Tad Piper, senior research analyst with Piper Jaffray & Co., said the on-demand software model also presents management challenges for IT. Buying subscriptions is as easy as presenting a credit card number, which means unless IT controls this process, "suddenly you have 100 users that you didnt know you had." Check out eWEEK.coms Enterprise Applications Center at http://enterpriseapps.eweek.com for the latest news, reviews and analysis about productivity and business solutions.
A panel of venture capitalists and venture spending analysts said that among business applications enterprise resource planning, business intelligence and on-demand software subscription services seem to be getting the most attention from enterprise buyers.