I found an interesting article on Accenture about how enterprise software developers are finding it increasingly more difficult to grow their business in the age of robust, feature-rich online applications.
To summarize, the article contends that in order to survive software manufacturers need to think about offering a broader set of “on demand” applications, rather than developing ever-more ‘niche-application’ offerings. In tandem, they need to reconsider the way that they set pricing.
The days of charging mega-bucks for software applications, whether packaged off-the-shelf-type products or more enterprise-deployed systems, have peaked. Even at the desktop level, whether we’re talking about SMEs or even consumers, there are ever-more applications that offer the features that people need, but at a radically-different pricing structure.
The applications are either available as a free-to-download package to install on your computer (such as Open Office) or as hosted applications that are either free (such as Google Apps) or charge you in a similar way to how you pay for your mobile phone calls (e.g. Salesforce.com or SunGard).
Software houses need to break with the traditional approach to pricing and usage if they are to tap into new growth opportunities. If not, it’s just a matter of time before their businesses become as niche as their products.