At the 2013 cleverbridge Client Networking Event (CNE) in Rome, cleverbridge co-founder and Building Keystones Chief Blogger Craig Vodnik led a panel discussion about trends impacting the software and SaaS industry today.
Joining Craig on the panel was Olaf Kehrer, managing director & co-founder of O&O Software, Stefan Utzinger, CEO of NovaStor Software, David Walsh, CMO at Uniblue Systems and Christian Blume, CEO & co-founder of cleverbridge.
Below is a video presentation of the discussion followed by a summary of the key points covered by the panel.
SaaS & the PC problem
Earlier in 2013, IDC reported that PC sales suffered from their worst market contraction ever, mostly due to the rise in tablets and such. The first question posed to the panel asks how does the growing number of connected devices impact vendors of desktop applications?
For David, the question for software vendors isn’t whether to invest in developing download products or SaaS, but how to incorporate a SaaS strategy into an existing business.
Part of the challenge is dealing with a shift in consumers’ notions of ownership. 10 years ago, consumers wanted to own their products. But now we are in the era of service and perspectives have changed. Generation Y in particular understands that value lies in access, not ownership. This is true with things like content, film and music. People don’t need to own it; they want to be able to access it like a virtual library. People are willing to pay per use or per month rather than have outright ownership.
Olaf makes an important point about the dependency of desktop software tied to Windows and PCs. But despite the controversy created by the IDC report, there are still a billion PCs being used by people across the globe. Not only that, but the life cycle of the PC is getting longer and longer. So desktop applications are still a major necessity, however there is a need to challenge and disrupt business models .
He notes that pricing strategies differ from desktop to SaaS just as just as they do between renting and buying a house. In the latter case, renting is generally more expensive, but costs are reduced when it comes to maintenance and upgrades. So too with software. Paying a subscription month to month adds up over time, but there are many advantages in this situation:
- SaaS-based web applications are platform agnostic.
- They are relevant to all verticals – unlike mobile apps which tend to be entertainment focused.
- They eliminate the problem of legacy products.
Regarding that last point, every company which implements a new version of their product for the desktop has to support older versions of the product which eats up a lot of customer support resources. A web app obviates all the hassle with legacy products while reducing iteration times significantly.
Stefan provides valuable insight based on his experience in the backup and recovery business. In this space, data must be moved quickly and securely in a way that makes it accessible in the customer’s preferred environment. Today, the preferred environment is not tied to tablets or smartphones. It’s tied to PCs, servers, and virtual machines. When people upload their data into the cloud, they still rely on having a local agent, which is probably a PC or server.
Christian emphasizes that people are not substituting their PCs with other devices, but rather are complimenting their PCs with other devices. Most people will agree that the experience with using the tablets and smartphones in a productivity environment is wholly inefficient.
They are great for consuming media and searching for information, but one simply cannot be as productive on a smartphone or even tablet as they can be on a traditional desktop or laptop. Even composing an email takes much longer because the keyboards are not as usable.
Like Olaf said, people are going to be holding on to their PCs much longer than before and software makers have an opportunity to support these older machines and keep them working at an acceptable level.
Desktop vs. mobile
Out of the $450 billion software market, mobile apps generated slightly less than 10 percent of that number. About $17 billion is spent on developing and marketing enterprise level apps. This data suggests that apps are a viable business. But is it in fact a legitimate revenue source for traditional software companies?
David points out that although there are millions of apps out there only a small percentage can be found by users. Also, pricing is again an issue. People won’t pay more than a few dollars for an app despite the fact that these apps cost just as much to produce and market as desktop software. Nevertheless, software companies must find a way to play in the mobile space. A marketer’s job is not to demand or guess where the consumer is going. His job is to be wherever the consumer is.
Christian thinks the situation is not as drastic as some may see. He thinks it behooves software companies to understand that the low price point we see with apps today isn’t because the product is cheap. It’s cheap because app makers are really seeking their users’ personal data. They price the app low to get people to convert to access their data. Once consumers realize this, they will be more adverse to downloading a bunch of apps they don’t use and go back to relying on the safer more secure traditional software companies.
Stefan focuses on B2B products and channel partners. He says that the key in mobile is to create partner enablement tools to help your partners be more efficient. So if you end up saving your customers a hassle, they will spend money for that.
Olaf’s perspective is that apps are not a good revenue source. For traditional software companies, the eyeballs gained from registering users for free downloads are not enough. Users need to pay in order for a business to function.
Keystone
When technology evolves, so does the way consumers shop online. For ecommerce merchants, the ultimate goal is to provide and communicate value to customers. As long as they can make their customers’ lives easier, they will find success in one way or another.
The remaining questions touch upon the definition of SaaS, the major trends of SaaS strategy, and how the Internet of Things will affect the software market.
