Software becomes a service, not product, industry
We've been talking about the phenomenon for some time, but it finally appears to be happening: Software is becoming a service, not a product. CIO.com picks up on this in a recent article, but people like Doc Searls have been talking about this in relation to open source since at least 2003.
What do you sell in open source? Services around the software, whether those services are support, Networks (update service, etc.), etc. What do you sell if you're a SaaS company? Software delivered as a service/utility.
Between open source and SaaS, the software industry has changed forever, as CIO.com notes:
It is only by building such a layer of [service] abstraction that will enable IT's focus to truly change from their traditional asset perspective ("what we have"), to the new value-oriented perspective ("what we deliver"). Furthermore, aggregating data at a service layer reveals far more potent information sources and the knowledge needed to drive service improvement and shift the culture and mindset of the IT organization.
Thinking of and delivering IT as a service allows IT to become part of the business, and not merely the dumb bits behind it. Open source and SaaS make it all happen. Savvy IT shops will invest in both.
P.S. One side effect of this shift is that the anomalous returns to software vendors - at the expense of customers - that software vendors have realized over the past few decades are gone forever. It makes no sense to continue fretting about whether proprietary software is more or less profitable than open source and SaaS-delivered (proprietary and open source) software. Who cares? That model is dying. Talking about whether it's more or less profitable is like talking about eternal youth is positive or negative.
It's not going to happen.
Time to move on to the next century of software: software of the customer, by the customer, for the customer.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay.
The interesting thing is -- this trend of products being transformed as services is not limited to just software. Just look around us -- music is now a service (rhapsody and itunes vs CDs). So are DVD's (Netflix vs Blockbuster), Gucci purses (Bag Borrow and Steal), and even cars (Zipcar).
These are all examples of things we used to buy, but can now subscribe to -- with little or no up front cost, and with much greater options, flexibility, and control for the customer.
In the next 5-15 years, people and businesses alike will buy less and subscribe to more. The customers are driving this shift, and the Internet is what makes it possible"
--Tien Tzuo, CEO of Zuora, www.zuora.com