March 1, 2004 5:20 PM PST

'Software as a service' is buzzword at confab

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SAN FRANCISCO--The software industry can no longer expect "the entire world around (software) to change to make it work," venture capitalist and former Oracle President Ray Lane said Monday.

Instead, companies must learn to sell software as a service, fulfilling customer needs to grow and shrink very quickly, said Lane, general partner with Kleiner Perkins Caufield & Byers, in a keynote address at the Software 2004 conference here.

Lane outlined a software future strikingly different from the past, in which proprietary technology sold at high price points. "This industry has arrived at a watershed," he told the audience of software executives and investors.

The software industry was created by a series of what Lane called "tectonic events," including the microprocessor, PC and Internet. "The likelihood is there will be another one of these events," he said. "I don't know what it will be, but in between we need to work on all the little things that make the last big thing work--the Internet."

Another message Lane delivered was that globalization is here to stay. He said he was impressed by a recent visit to India. "I went over thinking it was a black box--you send work over, and it comes back to you. What I found was innovation, work ethic and incredible skills," he said.

The open-source movement has also hastened the service-centric model of software by making it easier to swap out functional components, Lane said. "If you're starting a software business today, I suggest you go to a service model." New companies can be "pure" in their approach to business, he added, "because we haven't built up all this stuff around them yet."

Lane said Silicon Valley can use the current "period of normalcy in which we've finally become part of the rest of the world" to listen to its customers and give them what they want. "If we think about software as a service business this will again be the largest industry on earth."

His comments were echoed by other speakers at the conference. Jim Green, chief executive of start-up Composite Software, said successful companies will see


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the world from their customers' point of view and get in the door by offering low-priced, flexible software. Once companies prove themselves, customers may still sign licensing deals, he said.

Sanjay Kumar, chief executive of Computer Associates International, said customers no longer want to be locked in to three- or five-year software licenses. "We've told customers they can buy a three-year license, or they can buy it one month at a time," he said. "It's not about renting software. It's about giving customers a choice."

Kumar also warned against "artificial intervention" to stem perceived job losses due to offshoring. "We need very strong economic policies in this country to get innovation flowing," he said. "We need to build new industries here, not scream isolationism."

 

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