ZDNet – 5 ways cloud computing is transforming software vendors

It’s never easy being a software vendor. Demanding users, incredibly smart competitors, and rapidly evolving technology mean constantly being on top of one’s game. Now, cloud and Software as a Service have added a whole new dimension to what it means to be a software vendor.

For starters, it means more, much more, than simply shifting the delivery model from on-premises installation to online download. A new report from PwC — its Global 100 Software Leaders report — states “cloud computing changes how software vendors run their companies. Sure, there are technical issues such as reliability and security. But there are also business and cultural issues affecting all phases of a company, from product development to marketing and sales, extending to customer service and support.”

This shift has accelerated since PwC issued a similar report two years ago. At that time, the report’s authors state, “it was clear that cloud computing was already starting to change the software industry. It wasn’t clear how much it was going to change the industry.”

This year, cloud is sweeping into every corner of the industry. “SaaS/ PaaS revenues of the Top 50 software vendors now approaches 10% of their total,” PwC reports. The cloud model, of course, means lower revenues, and perhaps cannibalizing existing business. But market realities are pushing this transition. “Software vendors who’ve made the transition are well on their way to restructuring their operations to the new realities of lower average sales prices and margins,” according to Mark McCaffrey, PwC global software leader. “The companies that haven’t done so may not be on the 100 list anymore — and we haven’t seen the effects shake out yet.”

More of the ZDNet article from Joe McKendrick

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