Clouds on horizon for software firms

Vendors have survived on the traditional model of selling licences -­ not always to the satisfaction of customers

There is little doubt that software will be the biggest driver of technological innovation and business change in the years ahead.

But what will the future commercial model be for how software suppliers make the money they need for continued research and development (R&D)?

Where once hardware was the main force behind IT development as Moore’s Law dictated the pace of progress, today it is the capabilities provided by software that powers the web and the mobile world, as well as global competitiveness and productivity.

Vendors have survived profitably on the traditional model of selling licences -­ not always to the satisfaction of customers ­ but the process has worked.
The first challenge came from open source ­ “free” software available to anyone, although the technical complexity and need for service and support have been hurdles to overcome.

Nonetheless, now that such a normally conservative sector as schools is turning to open source, its legitimacy in the corporate world cannot be questioned.

However, the buzzword of the moment is cloud computing, a new term that encompasses technologies such as software-as-a-service, grids and virtualisation to offer an alternative route to access applications hosted somewhere out there on the internet.

Such software is rarely purchased using conventional licensing. Some is free, some is paid for on a per-user, per month basis. Look at the biggest software supplier to see the way things are changing. Microsoft is struggling to adapt its Windows and Office-driven income to the demands of the internet ­ a failed attempt (so far) to purchase Yahoo, billions of R&D dollars going into web-hosted applications, and speculation about a new internet-based operating system, codenamed Midori, that could one day replace Windows.

For IT managers, the future of software purchasing may be more unclear than ever, but your options are increasing, and the days of restrictive and often punitive licensing agreements may be coming to an end.