Software
Introduction
Software is a bunch of application code that is bundled together to perform a particular task. Software applications range from simple software to complex software that performs advanced complex tasks. Software to calculate and display simple mathematical equations is considered to be quite a simple application that doesn’t take a lot of effort and developers to build. On the other hand, software to analyze and deduce conclusions from weather elements such as humidity, temperature and air pressure requires a dedicated team of developers to come up with it and also its use requires users to get some form of training to be in a position to use the software appropriately.
Software applications are generally divided into two main categories depending on the license of the software. There is proprietary software and open source software. Proprietary software is software that has been developed and maintained by a certain corporation or an individual developer. Proprietary software is always accompanied by license terms that require that for the user to use the software certain conditions have to be met. This condition may be that a certain fee is paid or that a trial period for the use of the software is given after which the user will be required to pay the license fee or the software will be rendered ineffective. A good example of proprietary software is the Microsoft Office Suite that is owned by Microsoft Corporation. The license terms for proprietary software covers various aspects of the software application. The major terms to be observed for the application program to be observed are the manipulation and access to the source code. Source code is the human readable version of the software that has been developed by the programmer.
However, open source software is managed by a license that allows the sharing, distribution and manipulation of the software application and the source code. One caveat that users of open source software is that if the source code of the software application will be manipulated in any way, the GNU public license of the software must be included. The license also stipulates that the original authors of the work must be recognized, and no persons or groups should be discriminated against .
Software as a Service
This is a model whereby applications are hosted by the vendor and availed to customers via the internet. Users of this software submit data to be processed in the vendor’s server for processing after which then results of the computation are returned to the users. This has been made easy due to the fact that internet connection speeds for many users have significantly improved making it possible to access some of applications hosted in a vendor’s server. This model has become more and more popular due to its advantages such as easy and automatic updating and patching there is global accessibility to the software for all the users concerned and easier collaboration and administration of the software application. Businesses are also favoring this kind of software model as they are easy to deploy and decommission. This is derived from the element that the setup of this software doesn’t require a lot of changes to the existing infrastructure of the organization. Software as a service is different to the traditional model of software distribution where vendors had software in compact discs (CD) and then delivered the software to the user. In other cases, users would access the software from the vendor’s website, then download it for installation. In this traditional model, the software was installed on individual computers in an organization or a personal computer in a client’s user. Initially, software as a service was mainly used for web development but due to changes in technology it is handling taxes, gaming and word processing have become available. Software as a service is also referred to as on demand software. Software as a service solution began in the late 1990s and among the earliest examples was a website builder. This software could be accessible by any computer that had an internet connection. Other software was used to manage the network infrastructure of many organizations. This was the forerunners of what today is commonly referred to as cloud computing.
Software market trends for vendors
For decades, software applications have become the core resource in many organizations. They are essentially used to run the business organizations starting from customer relations to human resource management systems. Prior to the introduction of software as a service, software was offered as a product. Users had to buy it and install it on their computers to allow them the usage of the software. This was after making the necessary payment to the software vendors for the various software licenses. For the software vendors, the catch was to have as many clients as possible using the software. The higher the number of clients, the higher the amount of revenue the vendor generated. Since the introduction of software as a service model, things have changed significantly. Users typically conduct their daily tasks on the vendor’s servers without downloading the software to their individual computers. They pay a monthly subscription for the use of the software known as an annuity payment. In many scenarios, software as a service business model is mainly targeted at enterprises and organizations that have too many tasks to be managed as compared to consumer-oriented software.
Research indicates that, in the year 2006, software as a service market reached $6.3B. Though this was only a fraction of the $300B licensed software market, it had been a growth of about 26% since the year 2000. Another key important aspect noted during this time was that software as a product growth remained relatively flat. The need for software as a service was driven by growing business needs. Some of the core reasons for this were the reduced IT related costs, reduction in deployment time and improved innovation.
Traditional software vendors who relied on selling software licenses to users are facing stiff competition from their counterparts selling software as a service. With time, many users will migrate to the software as a service model, leaving the traditional software application vendors. New clients coming into the market will most likely be drawn into the software as a service market because of the continued improvement and popularity of the model. This means that traditional software vendors will end up in losses and unless they implement software as a service model, their profit and revenue margins will reduce greatly.
Consequently, firms offering consulting services will also incur heavy loss. This arises on he circumstances that there exists a reduction in the demand for software as a product and these firms model of income was based on offering services such as integration, customization, maintenance and upgrading of the software. Companies that mainly deal with software as a service, offering third party applications and internet service, stand to gain a lot in the continued software as a service market. As the demand for this software grows, software as a service company will have to work and try to meet this demand resulting in their growth as profit margins favor them. Third-party application companies will also gain as their services will be required by the growing software market. Internet service providers stand to gain the most out of this market. This is because access to this software requires constant and stable internet connection. This gives and edge to the internet service providers over other players in the market hence driving their profit margins wider and wider.
Software as a service market especially one that deals with business applications has two main players. First is the companies with large installed client bases and the other is the companies with a specific niche. Companies such as SAP and Microsoft have a lot of financial resources, large client base and have already made their brand name known. This makes the adoption of their business solutions easy because businesses have the necessary infrastructure and integrating new technology into the existing well known infrastructure is not a difficult challenge.
Elements that drive the grow of software as a service
The rapid growth of the software as a service market has mainly been attributed to the maturity of the software industry or specifically the corporate customers. Software as a service model has gained popularity due to the reduced costs of traditional licensing fees and no additional of new infrastructure for the use of the software . Also, companies can easily switch from one software solution to another as they don’t have to adopt any new infrastructure in their organizations. Research indicates a reduction in the users of the customer relationship management (CRM) system to the more cloud based software applications.
Other trends in the IT industry such as outsourcing of jobs whereby the software delivers its functionality without the business having to bother with the logistics of operating the software and the issue of security and risks involved in running the software are also driving the software as a service market to a greater height. It’s left to the software vendor to enhance the security of the applications such as through patch management and updating which was initially a big burden to customers in the traditional software model.
In a nutshell, companies dealing mainly in software as a service business have recorded significant growth in the recent years and analysts predict that sectors such as customer relationship management (CRM), human resource management (HRM) and financial management business areas will continue to rely on the software as a service model. The future looks great for software as a service model. Analysts predict a continued growth of this industry in the next two to three years both for small, medium and large enterprises that are willing to relinquish a little control of their software management. Traditional software vendors who ignore the software as a service software solution stand to lose the market share due to the changing trends.
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