Software Pulse

Business Strategy for Software Executives

November 28, 2005

Timothy Campbell

Finding Success with Hybrid Models

Software vendors should deploy a hybrid model in order to ensure a successful transition to on-demand pricing.

By Timothy Campbell, Steelwedge Software

Venture capitalists and pundits are bullish about the potential of the on-demand model; in fact, many VCs now require that a company have an on-demand model before they consider making any investment in the company. As a result, CEOs are scrambling to develop an on demand model strategy to complement their traditional license model.

A pure on-demand model can be extraordinarily taxing, particularly during the first three to four years of a software company’s go-to-market phase. This is because time-to-cash is significantly longer in the on demand model, leading to higher cash burn rate issues. With the size of investment rounds from VCs getting smaller, such models become very difficult to sustain.

As a result, it is almost an imperative that software companies pursue a hybrid strategy, going to market with both on demand and license models, which provide the broader market access and appeal of the on demand model, while also delivering on the operational benefits of the license model.

After having been CEO or general manager of three on demand companies, I have learned something about what it takes to drive the hybrid strategy until a company reaches critical mass.


Take Part in Offshoring Leaders Project

Ever wonder how your offshoring efforts stack up against the competition? Sand Hill Group is conducting a study of offshoring strategies at software companies. If you are a CTO, VP of engineering or a product development executive at a software company, click here to take a short survey. Respondents will be the first to receive the executive summary of the report with findings about strategy and best practices. Email for more information or click here to participate.

Taking Aim at India’s Success

India holds a strong lead as an offshoring destination. But dozens of other countries want a piece of the BPO pie. K. Yatish Rajawat outlines the new initiatives offered by several nations to attract new offshoring contracts in this week’s post to the Blog on Offshoring.

Back to the B2B Basics

Positioning of enterprise software products requires a thorough understanding of customers, competition and channel. Lawson Abinanti runs through the marketing basics in this week’s post to the Sales and Marketing topic of the Blog.

Share your insight on the software business. Email with your submissions to the Blog.

Get Ready for Software 2006

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Learn Strategy from Global Giants

The world’s biggest companies are fighting complexity — and winning. Read what your company can learn about focusing on productivity and leveraging assets in Strategy in an Era of Global Giants from The McKinsey Quarterly.

A new arrangement with The McKinsey Quarterly means readers can access premium stories about issues impacting software business strategy via Readers simply complete a one-time, free registration on McKinsey’s site to access the article.

Don’t miss last week’s article from The Quarterly, Transforming Sales & Service — how to differentiate service levels by segmenting customers according to their interaction requirements. Read more on our Insight page.

Poll: NT Servers Up

IDC says third quarter server market growth hit 8.1 percent — exceeding analyst expectations. For the first time, Windows NT accounted for more server shipments than any other operating system. What does this server growth mean for software makers?
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Parting Thought

"Never walk into a room without knowing how you're going to get out."
— CIA Manual

Courtesy of Malcolm Kusher, The Kushner Group