Every recession over the past 30 years has proven to be a forcing function for significant technological change. In good times, corporations can get a bit careless or lose focus. However, in bad times, corporations go to great lengths to find new levels of cost efficiency in their operations . . . even if it means changing processes and technology that they had used for many years. This recession is no different, change is beginning to happen, and traditional software vendors are the prime targets. The traditional “License” model employed by traditional software vendors is officially dead with this recession. The “Software as a Service” business model or even more specifically, the “Pay for Use” model, have emerged as clear winners. IDC recently raised its 2009 projections for the SaaS market. They now expect this segment to grow by more than 40% this year. This business model shift, coupled with the emergence of the new deployment platform of Cloud Computing will make it very difficult for traditional vendors to maintain their thrones.
Take my business, the test marketplace. Our market was long dominated by Mercury Interactive which was bought by HP several years ago. Mercury’s LoadRunner was the ideal tool for testing client-server applications in the late 80’s and 90’s, and its success drove Mercury to its leadership position under a license-based model. However, a license model that was very expensive ($30k/Test Hour). Today, the world has changed for HP/Mercury. We are all now developing and deploying new and much more dynamic Web applications for consumers around the world. Mercury’s technology, business, and deployment model are looking a bit like Tom Jones performing at a Beyonce concert . . . a little out of place. New test vendors are beginning to emerge as the new leaders of the Cloud Testing market. This includes new players like SOASTA that deliver a “pay only for test time used” ($1k/Test Hour). Companies like these are greatly reducing the cost of testing while even enabling more and better quality testing. This is an example of another changing of the guard, made possible by another down economic period and a requirement for greater reliability.
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