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I’m interested to know more about cloud computing, can you take time to detail how the process started, why the innovation, is it adaptable by all companies, or does the limitation arise forcing only certain segment be part of. Is the concept worth for Software application Vendors or do we see them take a dip. Does all this mean cutting corners instead of costs.
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After standardizing on Intel® Xeon® processor X5570 (2.93 GHz) for two-socket servers for design computing and enterprise server virtualization, Intel IT analyzed performance and total cost of ownership (TCO). What they found was that enterprise computing data confirmed that high-end processors can deliver 73 percent faster performance than low-end processors for the same estimated TCO. Read the analysis and find out how you can achieve the same savings.
Rajesh, lots of big open ended questions there, not sure where to start! How it started – start-ups wanted a way to deploy their service where they did not have to worry about dedicated servers and managing spiky traffic. That is a gross simplification. My post goes into the issues a bit deeper. Is it worth software application vendors moving to SaaS model? Absolutely. It will reduce your cost of sale and make revenue more predictable. The price is a reduction in short term revenue as stop selling perpetual license. Warning the withdrawal symptoms can be nasty!
One thing I would add to Bernard Lunn’s answer as it relates to software as a service (SaaS): It will definitely impact you financially, if as a software vendor you switch more of your business model to selling software as a service. However, how much this hurts or helps your business depends on a variety of factors.
(1) FINANCIAL REPORTING VS CASH FLOW — Depending on how you recognize revenue for accounting purposes today, SaaS may or may not substantially impact your sales revenue numbers. It’s possible that your finance people are already spreading out revenue over time for financial statement/tax purposes. Of course, in real dollars (cash flow) you still will receive less money up front if you start getting monthly payments instead of large up-front license payments. But as you think about the consequences of moving your business model to SaaS, just separate out the cash flow issue from revenue recognition — they may or may not be treated the same on your books.
(2) MONTH-TO-MONTH VS ANNUAL VS PERPETUAL — Consider the pricing model carefully. This is where the rubber really hits the road. Will you charge monthly for SaaS offerings? Will you offer an annual payment option, too? And how will that compare with your current licensing — are you currently selling a perpetual software license, or a limited term license? And how much of your current revenues involve both an upfront license payment and an annual support agreement of say 20% of the upfront license fee? See where I am going with this? Carefully compare where and how you are getting your revenue today, and then compare what it will look like under an SaaS model, broken down by month. A detailed spreadsheet is the only way to really do this accurately so that you can run what-if pricing scenarios and make informed decisions.
(3) SHORTER SALES CYCLE — It’s a lot easier to get a customer to sign up for a month-to-month payment, than a large upfront license. Consider that the sales cycle may be much shorter under an SaaS model.
(4) REACH SMALLER CUSTOMERS — You may be able to reach more customers (i.e., smaller customers) with a SaaS model, because your product may suddenly be more affordable to them.
Lots of things to consider, Rajesh.