April 12th, 2005
Software sector under attack
Joshua Greenbaum, a principal at Enterprise Applications Consulting, argues that the traditional software business model is heavily threatened by the spectre of SOA and composite applications.
"The whole notion of a software license — and with it maintenance and service — will be under attack as soon as service-oriented architectures and composite applications start dominating the market," he contends in Web Services Pipeline. "Say you’re a vendor that has just split CRM applications into dozens of individual Web services: What do you sell to the customer? One-off services? A collection of services tied to a unifying business process? Can you still sell a monolithic application called CRM? How do you charge? Is it a license, a subscription or a service? Do you price it by business process? Number of users? Business value? Can you charge maintenance on a service that isn’t necessarily running inside the customers’ firewall?"
Greenbaum says there are more questions than answers presented by this situation. He notes that companies such as TomorrowNow and Conexus — which are pulling service and maintenance business from PeopleSoft and JD Edwards (both now part of Oracle), respectively — are blowing apart the conventional business model that has supported the growth of the software industry.
"It’s obvious they’ll take revenues away from the conventional software business model and subvert the dominant licensing paradigm," he states. "If the trend continues, and the changes that service-oriented architectures promise come to fruition, the current economic model driving the industry will disappear. Which begs the final question: Without the big three revenue sources — license, maintenance and services — will innovation as we know it disappear, too?"
