Virtualization, On-Demand, And Open Source Stirring Stagnant Software MarketVirtualization, On-Demand, And Open Source Stirring Stagnant Software Market

Software makers are their own worse enemy, too long clinging to outdated models of development and delivery, said Jason Maynard, director of equity research for Credit Suisse Securities, at the information Spring Conference on Monday.

Software makers are failing to give their customers and themselves the tools and mind-set needed to grow in tomorrow's business environment.

There's not a lot of innovation in software, other than the emergence of devices such as RIM's BlackBerry, that makes workers more mobile, Maynard said. And the BlackBerry and other mobile forms of communication still have their limits in terms of their ability to deliver fully functional software in par with what users get from their PCs.

It's not just the fault of software vendors; it's their problem as well. Maynard said that for every dollar software companies generate selling their software, they're spending a dollar to make that sale through development, marketing, and other costs. Not exactly a recipe for growth.

As a result, look for software companies to change their distribution models to reflect the market's interest in on-demand computing, where applications are paid for in a way that more closely reflects how those applications are used. Salesforce.com has the right idea, Maynard said, and Oracle and SAP are delivering development tools to help end-user companies create their on-demand model. Oracle announced on Monday that middleware provider Real-Time Innovations Inc. is now distributing Oracle TimesTen In-Memory Database as part of the RTI Distributed Data Management platform for real-time systems.

There's evidence that other software makers are trying to advance more traditional software development models with an eye toward the future. Novell Monday introduced a Linux build service framework designed to simplify the creation of Linux packages for Suse Linux and other Linux distributions. This build service is expected to allow Linux developers to create executable Linux packages from community source code that will be installable on Novell's Suse Linux or other Linux distributions. The goal here is to more rapidly get applications developed and running in the Linux environments that Novell sells.

Look for server virtualization software, a key component to on-demand computing, to gain momentum as Microsoft seeks to make its presence felt in the market with its delayed Viridian component of Longhorn server, as VMware seeks to keep its lead, and as startups Virtual Iron Software and XenSource look to gain traction. VMware this week will open its virtual machine disk format specification to third-party software developers to help IT managers standardizing on VMware for thousands of production servers.

Despite the changes that lie ahead, Maynard is bullish on the future of software, pointing out that end-user companies are ready to embrace new advances in software as a way to not just to cut costs, but also to spur growth just as soon as software makers start delivering on new advances. "Businesses are under pressure to grow," he said. "Cost cutting doesn't cut it anymore."

One rule of thumb for software makers: Ask yourself, can your mother use the technology you're making? Maynard points out that software vendors can't underestimate the need to smooth over the underlying complexity of today's sophisticated applications.