Skip to main content

Software Subscription Models have Upset the Status Quo

While software-as-a-service solutions change the way that business technology is being used within the enterprise, legacy IT vendors are scrambling to evolve and rationalize their product portfolios -- relative to the emergence of nimble new players that apply very different business models.

According to the latest worldwide market study by Technology Business Research (TBR), software providers that also have hardware portfolios are implementing flexible delivery models, and now they're marketing the implied value of their unified and optimized product portfolios.

"We are seeing vendors embrace their inherent strengths, as large multi-line vendors integrate products to control more of the stack, while smaller pure plays leverage a deeper niche focus," said Meaghan McGrath, analyst at TBR.

Remaining Market Development Challenges

These actions indicate that some go-to-market issues still remain, as traditional software vendors look to maximize the monetization of their existing portfolios amid business user consumption transitions.

The shift of applications software to a subscription model has been a more rapid migration than in the infrastructure management (IM) space, which TBR attributes to the less complex transition of applications to the cloud rather than databases and middleware technology.

While bring-your-own-license movements have marginally slowed the forfeiture of software contracts, overall revenue continues to decline. To balance the lower up-front revenue of subscriptions, many software applications vendors have looked to new customer segments.

Some smaller vendors have responded by moving up-market into large enterprise accounts, but more prevalent is the opportunity for larger vendors -- with solutions that were previously too expensive and complex -- to now pursue SMB accounts.

Digital Business Transformation Upside

Vendors face similar challenges within the IM market segment, as evolution is being driven by changing application delivery methods -- as well as increasingly complex hybrid cloud computing environments.

TBR believes that vendor performance in the infrastructure management space continues to be challenged by delivery model shifts that favor subscriptions and ongoing financial headwinds outside core markets.

However, TBR research identified opportunities for vendors, particularly in the professional services space, to capitalize on demand for business transformation services as more customers adapt their legacy infrastructure to enable agile application development and DevOps methodologies.

Persistent declines of license and maintenance revenues across benchmarked vendors indicate market opportunities in the IM space are shifting to higher-value engagements, according to the TBR assessment.

Popular posts from this blog

Artificial Intelligence Growth at an Inflection Point

Business technology investment no longer follows a predictable path to growth. The global venture capital (VC) investment in artificial intelligence (AI) was close to its peak in 2021 reaching $22.3 billion, according to the latest worldwide market study by ABI Research. This is just $400 million shy of the historical high of $22.7 billion recorded in 2019. Compared to the $15 billion recorded in 2020, the market made a remarkable recovery, with a 48.5 percent year-on-year growth. Will the future AI marketplace return to stable growth, or will it remain volatile? Artificial Intelligence Market Development "COVID-19 greatly accelerated the speed of digital transformation within the enterprise. Businesses are looking for solutions to work processes automation, customer care, due diligence, transcription and translation, and sales and marketing enablement tools," said Lian Jye Su, research director at ABI Research . At the same time, COVID-19 led to the Great Resignation of 2021

How a Digital-First CEO Leads Transformation

Some leaders reject the notion that "wait and see" is the best response to disruptive change. Savvy senior executives are already driving digital business transformation throughout their organization in an effort to gain a bold strategic advantage. According to the latest market study by International Data Corp (IDC), Digital-First CEOs plan to drive at least half of their income from digital business products, services, and experiences by 2027 -- that's ahead of the market average of 39 percent. Driven by their response to the COVID-19 pandemic, these business leaders have changed how they think about the relationship between business and technology, and how they approach the next digital transformation era -- from scaling digital technology to guiding a viable digital business. Digital Business Market Development IDC defines digital business as value creation based on technology, which entails: 1) Automated customer-facing processes and internal operations; 2) Provision

Digital Solutions for Industrial & Manufacturing Firms

Executive leaders of fast-moving consumer goods (FMCG) are seeking guidance on how to apply new business technology in their manufacturing operations. CIOs and CTOs are tasked with gaining insight into the best solutions for digital transformation. ABI Research evaluated the impact politics, regulation, the economy, supply chain, ESG, and technology are having on FMCG, pharma, producers of steel, chemicals, pulp and paper -- as well as the mining and oil & gas sectors. Digital Transformation Market Development "Our assessment found that the FMCG sector is under pressure from all sides," says Michael Larner, industrial & manufacturing research director at ABI Research . Securing raw materials is challenging considering lockdowns in China and limited grain supplies from Ukraine. Supply shocks are raising input costs, and operating costs are rising with higher energy costs coupled with the pressure to pay higher wages and work sustainably. "We all hoped that with th