Innovation/SaaS: As Software Evolves, Where Will it Take Us?

It’s hard to keep up with the daily web technology trends and announcements, much less try to extrapolate where things will be five or ten years from now. But Timothy Chou, former President of Oracle on-Demand, tries to do just that in an Informationweek’s Optimize magazine by predicting four lessons for the future of enterprise software.

1. Keep it Simple. Google is an example of a company that has become great by keeping their focus and providing a service that is simple and easy to use — information search monetized by targeted ads. Chou sees a future of software composed of very many highly-focused services from many vendors delivered on-Demand.

Infrastructure costs will continue to plummet. And platforms like Amazon’s EC2 will make it easy for vendors to deploy on-Demand services. The foundation is in place to encourage the growth of thousands of specialized on-Demand services.

On-Demand services will be very low-cost and sold at high volume. Traditional software sold in the range of $100/user/month. Software sold as SaaS is now being sold more on the range of $10/user/month — a drop of a factor of ten. Chou thinks that in the not distant future that those costs will drop by yet another factor of ten.

For non-business use we’re already seeing costs plummet to nothing. Google Apps offers an introductory business bundle for small companies that is free. Zoho Office offers database applications, documents, and project planning for free or nominal costs.

2. Software as a Commodity. The focus of computers has moved from hardware to software over the years. Chou sees another transition where software becomes more of a commodity and the value to consumers will center on information.

3. Business software to become more game-like. Games have historically excelled at state-of-the-art graphic presentations and interactivity. On-line global multi-player games are experimenting with new elements of group collaboration. Business software can learn much from game software capabilities in the areas of graphics and collaboration.

4. Software will be more service-based than product-based. Increasingly software companies are relying more on service dollars rather than dollars stemming directly from products. From 1996 to 2005 services revenues grew. For example, Sun Microsystems shifted from 0 to 40 percent, and IBM moved from 30 percent to more than 50 percent.