December 06, 2008

Read this.

Estimates vary, but the global software industry probably generates annual revenues of about $500 billion. Industry analysts are saying that up to 25% of new software sales will be delivered as SaaS within the next few years. That implies a shortfall of some $100 billion of license revenue that won’t be collected upfront any more, along with whatever it takes to buy and set up the infrastructure to operate it — maybe another $100 billion?

These are scary numbers, and others can do a better job than I of validating them, but let’s say they’re even half accurate. Will the industry have enough nerve collectively to fund that revenue gap, not just for a year, but over a period of several years as the big switch to cloud and SaaS accelerates? Especially if such a huge financial shortfall coincides with the tail end of what is starting to look like it will be a deep, traumatizing recession?
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