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.
Software Trends, Views, Issues, producteering, and services 
December 24, 2007 at 8:08 am
I won’t agree with this. See webex.com, google, etc. They are already billion dollar companies. In this world, majority of the services are subscription based. You want to have a telephone connection, gas connection –> get it on subscription. People are lot comfortable to test the waters and spend on usage basis. Even, if I go for deployed product which I may own, I still have to pay 20% on maintenance.
Whichever version (saas, ondemand, deploy) it is, unless, I am happy with my vendor, I will not go for renewal. So, customer service is a must either way you go.
December 25, 2007 at 11:39 am
Shankar, Thanks for your comment on this post. I do agree with the fact that majority of services are subscription based. My intention in the post was not to bring that out, and was to look at the challenges that an ISV may have to face in transitioning to SaaS (from product-centric to becoming service-centric).
I certainly believe, whether or not to offer a SaaS version is not in the hands of the vendors, instead it would be driven by the fact that customers want it that way.
Add to that, subscribing to SaaS for an enterprise would actually be more expensive than traditional forms of licenses over a period of time.
December 27, 2007 at 1:48 pm
oh – so you dont believe in all those Gartners/McKinseys whitepapers that talk about Lower TCOs for SaaS-subscribers in the long-run? even if it is lower only by ~10%??