Menu
Menu
The Future of Software

The Future of Software

[SCENARIO ONE]

A Land Where Giants Rule

In 2010, CIOs will find themselves hostage to a few monopolistic vendors that keep software expensive and complex.

Software vendors are like dinosaurs - they live in an environment that encourages them to grow really big to survive.

The bigger the vendor, the safer CIOs feel. It's not that CIOs are happier with the behemoths - in fact most of them hate the endless cycles of upgrades and complex maintenance and support agreements that the big vendors offer. But a big vendor promises more longevity and suites that are often easier to integrate than the best-of-breed applications from many smaller vendors. The lumbering beasts rule not because they are better or faster or more efficient than their smaller counterparts, but because they solve some - though far from all - of the CIO's integration problem.

And that's why CIOs will keep shovelling food to the big beasts and starving the little ones through 2010. The only other segment to get a healthy feeding will be outsourcers and services vendors that offer software bundled together with integration, upgrades and customisations as part of the price. Call it hyperconsolidation of the software market.

Unless Web services lives up to its promise - and we predict it won't - integration will remain a huge burden that drives up the overall cost and complexity of IT. The trend toward outsourcing will continue as many companies decide that their CIOs cannot solve the integration problem on their own. Web services will remain tightly controlled by a handful of large vendors that have no economic incentive to fix the problem. That would simply free customers to choose smaller, more nimble competitors.

Open-source software will not be the answer to integration problems either, though it will continue to drive down prices in selected areas of the software infrastructure. In fact, open source may turn expensive databases such as Oracle and IBM's DB2 into commodities by 2010. Smaller vendors will move toward the open-source model because it will lower their marketing costs. Rather than devoting 15 per cent to 50 per cent of revenue to selling, they will simply give it away, build a user base through word of mouth and then sell services and add-ons.

If open source takes hold in the big corporate infrastructure, enough momentum could build for an open-source integration technology to emerge that would rival today's Web services model. But solving the integration problem would be so complex that it's unlikely - unless someone with the technology savvy and leadership abilities of a Linus Torvalds emerges to head the effort.

Net result: Big company CIOs in 2010 will find themselves increasingly beholden to an outdated economic model for purchasing, installing and maintaining software. Fewer, bigger vendors will mean higher prices, fewer choices, higher switching costs and increasing vendor lock-in. There is a model that could bring the dinosaurs to heel: It's one where vendors would sell applications as specific, highly configurable components that upgrade automatically and integrate with any type of system at no cost and minimal effort. Companies would pay for these applications only when employees use them.

This vision, however, will not arrive by 2010 for purely economic reasons. Wall Street might throttle the stock prices of vendors that try to swear off the big up-front licence fees that pump up quarterly revenue in favour of the slow drip of a pay-by-the-drink model. And the big vendors simply have too much invested in the status quo to open up their markets to smaller competitors. (For a different outcome, see "Open Source Slays Goliath", below.)

"For customers, [the enterprise software business model] is like being held hostage," says Julie Giera, vice president and research fellow for Forrester Research.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Join the newsletter!

Error: Please check your email address.

More about ACTCSC AustraliaDepartment of JusticeEDS AustraliaForrester ResearchGartnerHewlett-Packard AustraliaHPIBM AustraliaMeta GroupMicrosoftOraclePromiseSAP AustraliaSiebel SystemsUS Department of JusticeWall Street

Show Comments
Computerworld
ARN
Techworld
CMO