“IT leaders should be hyper-focused on getting out of the traditional support and maintenance business,” warns Jonathan Reichental, the Irishman who is CIO to the City of Palo Alto in the heart of Silicon Valley.
Dublin: 18.04.2015 02.15PM
While overall global software revenues grew a modest 5pc to US$255bn in 2012, revenues from software as a service (SaaS) cloud providers saw revenues jump 60pc to US$20bn. The end of the ‘pure play’ software provider is nigh, says PwC.
PricewaterhouseCoopers’ (PwC) latest Global 100 Software Leaders Report data shows a consistent and growing shift towards SaaS.
As a result traditional software companies are reinventing themselves to provide SaaS.
“As markets and resources expand globally, the demographics for the Global 100 Software Leaders have begun to transform—and it’s not out of the realm of possibility we may see non-traditional companies enter future Global 100 rankings,” explained Mark McCaffrey, Global Software Leader, PwC.
“Boundaries between hardware and software are blurring as technology products are being commoditised and companies are looking to the value of software to act as a differentiator. While challenging as competition over innovation increases, we’ve entered a period of great opportunity for those who plan and act strategically.”
According to the report, two major trends are driving the review and overhaul of technology companies’ existing economic models.
The first trend is increased competitiveness for total available markets (TAMs). Previously, technology companies had clear, delineated lines of what kinds of products and services they sold and what markets were served. There was a distinct server market, storage market, enterprise software market and so forth. Today, companies offer a wider variety of products and services that fall outside of their previous scope.
The second trend occurs outside of the technology sector. Non-technology companies are expediting efforts to digitise their offerings and are changing the way they buy from technology companies.
Companies are now relying on software and online services for more than just marketing. Instead, software is now being embedded into products as a valuable capability and as a competitive differentiator. As technology companies move from being ‘pure play’ operations, their entire development, sales and distribution models will be upended, according to PwC’s findings.
The blurring of TAMs and the shift in the way companies buy technology has created a tipping point for the technology sector.
The era of the ‘pure play’ in this sector is over, says PwC.
Cloud device image via Shutterstock