Another software technology called virtualization A type of software that allows a single computer (or cluster of connected computers) to function as if it were several different computers, each running its own operating system and software. Hardware clouds can let firms take their software and run it on someone else’s hardware-freeing them from the burden of buying, managing, and maintaining the physical computing that programs need.
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With SaaS, you don’t need to own the program or install it on your own computer. In one variant of this approach known as software as a service (SaaS) A form of cloud computing where a firm subscribes to a third-party software and receives a service that is delivered online., users access a vendor’s software over the Internet, usually by simply starting up a Web browser. is making it more common for a firm to move software out of its own IS shop so that it is run on someone else’s hardware. A set of services referred to as cloud computing Replacing computing resources-either an organization’s or individual’s hardware or software-with services provided over the Internet.
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Giants shudder-“How can we compete with free,” while others wonder, “How can we make money and fuel innovation on free?” And if free software wasn’t enough of a shock, the way firms and users think about software is also changing. offerings-free alternatives where anyone can look at and potentially modify a program’s code-pose a direct challenge to the assets and advantages cultivated by market leaders.
Open source software (OSS) Software that is free and where anyone can look at and potentially modify the code. Network effects and switching cost can also offer a leading software firm a degree of customer preference and lock in that can establish a firm as a standard, and in many cases creates winner-take-all (or at least winner-take-most) markets.īut as great as the business has been, the fundamental model powering the software industry is under assault. Vogelstein, “Rebuilding Microsoft,” Wired, October 2006. Microsoft generates one and a half billion dollars a month from Windows and Office alone. That quality leads to businesses that can gush cash. Just duplicate, no additional input required. to produce an additional copy of a software product is effectively zero. Unlike physical products assembled from raw materials, the marginal cost The cost of producing one more unit of a product.
Once a successful software product has been written, the economics for a category-leading offering are among the best you’ll find in any industry. that placed Microsoft’s Bill Gates and Oracle’s Larry Ellison among the wealthiest people in the world.
Kirkpatrick, “How the Open Source World Plans to Smack Down Microsoft and Oracle, and…,” Fortune, February 23, 2004. It is the two-hundred-billion-dollar-per-year juggernaut D.
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