Moving to on-demand versions definitely makes sense irrespective of what some of the billion dollar companies think. On the ground, what does it mean for the ISVs to transition to on-demand versions. It primarily means moving away from Perpetual licensing model to on-demand model. Does this mean only a change in the delivery model? It involves change in the mindset of all the stakeholders of an ISV in moving from a product-centric organization towards a service-centric organization.

There is not a single function in an ISV that doesn’t get affected by this transition, product management, engineering, testing, professional services, finance, marketing, sales and support. Where would ISVs find it the most difficult to get the buy-in from? It definitely has to be from the sales organization and to a certain extent from finance.

Putting myself in the shoes of a sales person, I would rather sell a software license worth $100000 than selling a monthly subscription for $2000. This really doesn’t excite me… Sales also would not be able to employ a close and forget policy and the customer has to be kept satisfied throughout the engagement, affecting their incentive structure. Moreover, as an organization, one would want to achieve this transition while continuing to report high revenues and protecting the profitability.

There are quite a few challenges that need to be addressed in this transition. This definitely doesn’t look a plausible story for the billion dollar biggies. Can they ignore this? Is there a silver bullet to transitioning to on-demand and at the same time maintain profitability & revenue growth? Are services targeted only towards SMB market? Would features define what end of the market would adopt services? I would be addressing some of these in my upcoming posts.

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