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The morning finished with Timothy Chou, author of The End of Software and the former president of Oracle's online services group, discussing the radical changes in the software industry due to software-as-a-service. Anyone who entitles his talk "To Infinity and Beyond" and has a picture of Buzz Lightyear on the title slide is okay with me. :)

He looks at the economics of why the transformation is occurring, and encourages becoming a student of the economics in order to understand the shift. Considering a sort of Moore's law for software, traditional software (e.g., SAP) costs around $100/user/month to licence, install and support in various configurations; SaaS (e.g., Salesforce.com) costs around $10/user/month; and internet applications (e.g., Google) are more like $1/user/month.

He makes the point that the SaaS revolution is already occurring by listing nine SaaS companies that have gone public (including Webex and Salesforce.com); these nine went from just over $200M in revenues in 2002 to $1.4B in 2006.

Chou gives us three lessons for the future:

• Specialization matters. Think Google, which was originally an insanely simple interface for a single task: searching. Or eBay, which just does auctioning. This isn't just a product functionality or distribution issue, however; the software development process has fundamentally changed. It's now easier to become a software developer because of the tools, and this drives the development of niche applications. In a world where Citibank has more developers than Oracle, we're not just buying software from the "professionals" any more; we're creating it ourselves or buying it from much smaller players.
• Games matter. Chou uses World of Warcraft as a collaboration example, and it's a great one. People from all over the world, with different languages and ethnicity, come together for a common goal, then disperse when that goal is achieved. WoW makes specialized skills and skill levels transparent, so that you immediately know if another player's skills are complementary to your own, and how good he is at that skill. In general, you can't do that now in business collaboration environments, but it would be great if you could. Also of interest is the world of currency within these games, and how that currency is valued in the real world.
• Service matters. The service economy is not just about human labour; service is information. Consider the information that Amazon has about books, from finding them to other user reviews to recommendations. The information is there, but some of it is hard to find/analyze. The "surface web" of approximately 100TB is what you could find on Google, but there's a much deeper web of more than a million TB, mostly inside corporate firewalls. How much better service could we have if we had access to more of that information in the deep web?

Posted by Sandy Kemsley at 06:11 PM in Enterprise2.0 • NewSoftwareIndustry • SaaS | Digg This | Add to del.icio.us

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