IW500: Cracks In The Enterprise Software ModelIW500: Cracks In The Enterprise Software Model

A panel of software industry veterans at the information 500 conference today argued that the old, on-premises enterprise software model is nearing the end of the line. Taking its place: Web-based software and cloud computing."We're at the end of one technical lifecycle and at the beginning of another," said Aneel Bhusri, president of software-as-a-service vendor Workday. Before co-founding Workday with Dave Duffield, Bhusri was an executive with PeopleSoft, an old-guard software company acquired by Oracle in 2005.

Of course, the argument that SaaS is supplanting on-premises software isn't new, but Bhusri and the other panelists pointed to growing signs of discontent among business and technology managers and a new willingness, even requirement, to shift to SaaS and cloud computing. "We're starting to see cracks" in the old model, said Ray Wang, a software analyst with Altimeter Group.

Christopher Lochhead, former chief marketing officer with Mercury Software (acquired by Hewlett Packard) and now a senior strategy advisor to SaaS vendor SuccessFactors, said the cloud has "time shifted" the procurement of enterprise applications. A software acquisition process that might take weeks or months in the past can now be accomplished in minutes or hours with SaaS. "The real innovation is when technology and a new business model meet," Lochhead said.

About the same time that Lochhead and the others were describing this out-with-the-old, in-with-the new phenomenon, federal CIO Vivek Kundra unveiled Apps.gov, the federal government's new portal for Web-based social media, productivity, and business applications and infrastructure as a service. With its on-demand simplicity, Apps.gov represents a breakthrough in how federal agencies can order and access applications and other IT resources.

Apps.gov is a compelling example of just how dramatically things are changing, but I would warn against writing off the "old" enterprise software market too soon. CA, IBM, Microsoft, Oracle, SAP, and other software vendors continue to generate far more revenue from the old model than the new. Conventional software practices are deeply rooted and will be with us for years to come.