What is common between Microsoft & Oracle? The fact they make tens of billions of dollars in software revenue, sure! And that their predominant source of revenue is from software products. They were founded in late 70’s. I am sure you know all this. What is new is that in the times to follow great software product companies like Microsoft, Oracle and SAP will either disappear or switch to services model. This makes Steve Ballmer and Larry Ellison, The Two Last Samurai of the software products.
It is extremely important for upcoming software ventures to understand this trend for the successful implementation of their selling Strategy. Basis of my analysis is the revenue data from Top 100 Software companies. 70% of the top Software Companies attribute their revenue from the Products. However what is more interesting note is the fact that product revenue is only 24% ($200 Billion) and the rest from services. Based on these findings and other supporting data we can conclude that selling of software products or RTU is on its way out. It is also clear that large numbers of products only companies are dependent on large system integrator partners to be successful. Many of the software companies are now dependent on Internet for selling Software as a Service (SAAS). The latest trend of “Cloud Computing” and selling software as a utility or infrastructure or transactions or bundled with content; are all indicative that software as RTU is disappearing.
These changes will bring fundamental changes in the way Software Development Centers are organized. I have listed some of these changes -
1. Product Management and Program Management roles will get merged under one person. No more hot potato meetings.
2. Product Management will move up the value chain. The new age product manager will be responsible for Sales and Business Development. No more hypothetical discussion in the beginning of the year what we must build to sell.
3. Feature priority are now decided by the end-user metrics. Let user enjoy the value but not the burden of platform.
4. No more professional services or SI certification issues.
This model will unleash highest level of optimization in knowledge workforce. The trouble is that most of the organizations are not able to come to terms with their own established processes and structures.
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