The Wharton Business School, on its “Knowledge Wharton” website (highly recommended), acknowledges the power of the cloud, particularly SaaS. The article digs into both the delivery model and the changes that SaaS is driving in software pricing. It also recognizes the business challenges that traditional vendors are experiencing:
“Cloud computing is not only changing how users access software applications, it’s also upending the pricing model for software products.”
The article goes on to say,
“Meanwhile, software giants… are trying to keep up with disruptive distribution and pricing models that may threaten their lucrative way of doing business.”
Kevin Werbach, a legal studies and business ethics professor at Wharton, is of the opinion that, “The old model of selling software in a box or [through] an enterprise server license and then charging for periodic upgrades has been disrupted.” He concludes that, “It inevitably will be overtaken by Internet and cloud-based distribution.”
Saikat Chaudhuri, Wharton management professor, commented on the potential of established software giants, such as Oracle, looking at SaaS acquisitions to hedge their traditional business models in an attempt to address this changing market. According to Chaudhuri, “It’s better for you to cannibalize yourself in a controlled manner than let someone else do it and hurt you.” Acquisition may be the best strategy for these on-premise vendors as they struggle with the skills and mindset to build multi-tenant SaaS solutions to match the best in the industry.