IWMS expert and Lucernex President, Joe Valeri (see Joe’s management summary here), discuss the risk of NOT buying a Software as a Service (SaaS) Cloud delivered solution.

In October of 2005 Bill Gates sent a memo to Microsoft’s top management sounding the alarm that the rise of utility computing threatened to destroy its core business.1 Microsoft, at the time, was a pure perpetual software vendor, selling all their software to be installed on a customer computer or server and charging large fees up front with a small annual maintenance fee.

This is the way virtually all vendors in the IWMS space continue to do business today – large upfront fees with even larger implementation fees to put software on several servers behind the corporate firewall where the company then has to allocate internal IT resources to manage and maintain the application.

As is evident by Bill Gates memo and a fantastic book on the subject of Utility Computing, called “The Big Switch” by Nicholas Carr, the business model of providing traditional perpetual software licenses simply cannot survive much longer.

In his book, Mr. Carr discusses how the introduction of the electricity grid, which companies used to have an internal infrastructure to produce, dramatically shifted competition between companies whose business were driven by how much electricity they could produce to deliver their products.

He then draws a telling comparison to how utility computing will cause the same “Big Shift” in how software is delivered. Much like electricity, companies that embrace the utility computing grid can provide their products far cheaper. Companies that lagged behind in adopting the electricity grid were driven out of business. With utility computing, also known as Cloud computing, the same shift has already started and it’s impacting the IWMS industry.

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