We all know that the world is changing. When we take a look at the world of software then we see a lot of fast moving changes pass by. Software vendors such as Microsoft, SAP, Oracle and IBM are well known and some of them are already over 40 years old. Moving on premise software to a software-as-a-service model is for many of these companies challenging and especially the part where they move away from their own legacy systems in order to create new value.
The challenge for software vendors
The challenge lays in the fact that they have to accept that the financial model is changing. This means no longer selling licenses in which companies have to invest. This is a hard job regarding the fact that they have shareholders who do not want their value to decrease. Also the influence on the cash flow of these software vendors is enormous when changing the model. However it is a move that the software vendors have to make in order to keep on existing in the next couple of years. Companies just do not want to invest upfront in software anymore.
The “financial” owners
How does the market reacts to software companies launching new SaaS offerings or transitioning an on-perm software product to as a service. Well According to the Harvard Business Review, investors preferred new SaaS products over product conversions and valued having a product fallback option. “These choices may change the intra-day stock valuation by as much as 3.5 percent and 2.2 percent, respectively,” according to HBR.org.
What is next?
All the new software ventures such as NetSuite, SalesForce.com, Workday started in the area of subscription and they are used to it. There is no legacy around cash flow and selling licenses in the investment model. This no longer the future. This is now.