Gartner: SaaS and open source pressuring proprietary software vendors to drop prices
Gartner has issued a research note that finds that proprietary software is facing serious pricing pressure from a range of different software trends, among them Software as a Service (SaaS) and open source. My heart is bleeding for these poor vendors who have spent decades wringing every last dime out of customers with the "build once, charge everywhere" moment in time that digitization afforded. (I say "moment in time" because it's increasingly clear that digital "abundance" business models make more sense than faking scarcity.)
Gartner notes seven trends putting pricing pressure on yesteryear's software business models:
These include business process outsourcing; software as a service (SaaS); low-cost development environments, such as China and India, combined with modular architectures and service-oriented architectures; the emergence of third-party software maintenance and support; growing interest in open source; the rise of Chinese software companies; and the expansion of the Brazilian, Chinese and Indian markets.
Who wins in this new software economy? Open-source vendors, of course, but especially enterprise buyers, as Gartner notes:
Up until now the unique nature of the software market has meant that buyers had very little negotiating power after the initial purchase of a software licence. We expect those dynamics to change considerably over the next five to 10 years giving CIOs and software procurement officers more bargaining power while potentially reducing software vendor profit margins.
Of course, it's going to take a long time to topple decades of wasteful, inefficient software practices, but we'll get there. Maybe it will take decades. But eventually customers will win. In the meantime, for those IT buyers who want to get a headstart on the shift to pay-for-value, take a look at open source, SaaS, SOA, etc. You have nothing to lose but your chains. :-)
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure.
