The End of Software: Transforming Your Business for the On Demand Future [Paperback]

Timothy Chou (Author)

Book Description

ISBN-10: 0672326981 | ISBN-13: 978-0672326981 | Publication Date: September 26, 2004 | Edition: 1

Do you know what is the real cost of your software? Before you reach for a calculator, be forewarned that it's a trick question. Even technology industry analysts and seasoned IT executives have difficulty putting a hard figure on the Total Cost of Ownership (TCO) of today's enterprise application solutions. What makes the equation so tricky is the sheer number of variables that must be factored in, many of which cannot be lined up in a neat column and reconciled, such as issues of security, availability, performance, problem resolution and change management. The End of Software: Transforming Your Business for the On Demand Future, by Dr. Timothy Chou, is a groundbreaking book for business managers and executives that challenges conventional approaches to business software and proposes new alternatives to managing and maintaining the systems that companies depend on.

Read What Industry Experts Have to Say:

• "Whether you rely on computer software to run your business, create software solutions, or invest in software companies, you are facing the shift from software as a product to software as a service. In The End of Software, Dr. Timothy Chou makes the case for Software on Demand and shows you who's already out there creating and using this new model." Fred Magner, Chief Information Officer, Unocal Corporation
• "As a pioneer of the On Demand delivery model, Dr. Chou challenges certain conventions long held by the software industry. The End of Software provokes industry participants to re-think how big software should be packaged, sold and delivered in the future." Stephen Wong, Chairman and Chief Executive Officer of Embarcadero Technologies
• "Dr. Timothy Chou's book The End of Software presents a logical argument for the shift from selling and buying software, or the promise of the value that software represents, to selling and buying the actual value that software can bring to a user. This is very persuasive, especially when you consider the legacy of software vendors, who are notorious for over-promising and under-delivering. As Dr. Chou so clearly understands (and why shouldn't he-he's lived it), this new delivery method simply makes sense. But the world is often slow to change; as keen observers of the technology industry, we'll be watching closely." John S. DiFucci, Senior Software Analyst, Managing Director, Bear, Stearns & Co. Inc.

Editorial Reviews

About the Author

Dr. Timothy Chou serves as president of Oracle On Demand, the fastest-growing business inside Oracle. Oracle On Demand provides applications on demand for more than 250,000 corporate users globally. Users access ERP, CRM, HR, purchasing, supply chain, manufacturing and business intelligence applications from more than 25 countries around the world on both public and private networks. Under Dr. Chou's leadership, Oracle On Demand was recently recognized, along with IBM and EDS, by a multiclient Meta Group study as one of the top three companies customers are currently looking to today for application management and outsourcing services.

Excerpt. © Reprinted by permission. All rights reserved.

Introduction

Twenty-five years ago, the high-tech business was small, computers were largely relegated to accounting, and the money major corporations spent on information technology barely made a dent in their overall budgets. Today that has all changed. High-tech businesses are some of the largest in the world. The Dow Jones Industrial Average includes four technology companies whose total market capitalization exceeds $600 billion. Computers have moved out of the role of accounting to managing supply chains, tracking manufacturing processes, and managing orders globally. There are even multibillion dollar companies founded and dependent only on information technology, such as Yahoo! and eBay.

With the increased role of computing has come increased spending to the point that global corporations' IT spending is no longer a rounding error. Today, we can estimate that the total spent on IT exceeds $1 trillion dollars per year. More amazingly, 75% of that is used for managing existing systems, most of which is dominated by the cost to manage the complex software that has been built over the past 25 years. Where does this cost come from? The increased usage of computing also brings increased exposure. Corporate costs for managing the security of computing is increasing each year. Today, most companies run 24/7; with no weekends or days off, managing the availability of these systems is a greater and greater challenge. And increasing dependence on computing also means an increasing need to change the environments. Some have estimated the cost to upgrade an enterprise application at $1,000 per user.

The disadvantage of this large expenditure on the operation of existing systems is that, with more than 75% of the budget being spent here, only 25% of the budget can be spent on new innovations. Unfortunately, the cost to manage past sins increases each year, so in time the amount of money spent on anything new will vanish—an alarming prognosis for any high-tech company.

Software as a service—or, as we will refer to it, software on demand—is the next step in the software industry. This isn't because it's a cool idea, but because it fundamentally alters the economics of software. If the cost of software (to a software company) can be reduced by a factor of 10, the shift in the software industry is as fundamental as the advent of the Intel microprocessor was to the hardware industry.

This book is full of examples and challenges to this transformation. Traditional software companies, including Oracle, are making the change, and new software companies such as WebEx are leading the way for next-generation startups. Read on if you think this will change your business. If you're the CIO or CEO of a large, medium-size, or small company and a consumer of software, you need to understand how this shift can change the economics of your IT budget and allow you to free up capital and resource to invest in the future, not the past.

If you're the CEO of a software company, you need to understand how the software on demand model changes your business starting in support, reaching into how you develop software, and culminating in changes to your fundamental business models based on a new economy. Finally, if you're an investor in high technology, I'm sure you wish you had bought Intel back in 1978. Key companies, both new and old, are participating in the move to software on demand. It's important that, as investors, you understand who gets it and who's pretending. The debate is not whether this shift in the software business will happen, only the rate.

© Copyright Pearson Education. All rights reserved.

Product Details

• Paperback: 192 pages
• Publisher: Sams; 1 edition (September 26, 2004)
• Language: English
• ISBN-10: 0672326981
• ISBN-13: 978-0672326981
• Product Dimensions: 9 x 6 x 0.5 inches
• Shipping Weight: 9.6 ounces (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #175,957 in Books (See Top 100 in Books)
  • #43 in Books > Business & Investing > Skills > Office Automation

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Customer Reviews

Most Helpful Customer Reviews

9 of 10 people found the following review helpful:

3.0 out of 5 stars Skimpy, September 30, 2004

By 

W Boudville (Terra, Sol 3) - See all my reviews
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This review is from: The End of Software: Transforming Your Business for the On Demand Future (Paperback)

Directed at a nontechnical reader, Chou suggests why a radical turn towards a new model of on demand software might help your company. He cites the massive cost that companies already pay, in maintaining software. From annual licensing fees to the cost of sysadmins to manually install patches and upgrades. Chou points out, as have others, that the Total Cost of Ownership can be several multiples of an initial outlay.

Therefore, his branch of Oracle advocates a utility-like approach. You buy capacity on an as-needed basis. There are possible trends, like an increased automation of patches and upgrades, that aid his case.

Left unsaid in all this is how Oracle is playing catchup. For example, IBM has devoted massive resources in this field, under such names as Globus, utility, grid, autonomous and on-demand computing. This book is rather skimpy. Apart from general statements, I kept searching in it for more details. A far more substantial book is "On Demand Computing" by Fellenstein (IBM Press). You may want to check that book instead.

9 of 10 people found the following review helpful:

5.0 out of 5 stars IT Outsourcing, the Oracle Model, September 23, 2004

By 

John Matlock "Gunny" (Winnemucca, NV) - See all my reviews
(REAL NAME)   

This review is from: The End of Software: Transforming Your Business for the On Demand Future (Paperback)

Although titled The End of Software, the book really doesn't mean that. It's about outsourcing the IT function along the lines of EDS, IBM's Global Services, or Oracle On Demand. As president of Oracle On Demand, most of the busines stories concern successful contracts where Oracle On Demand has set up or replaced the IT department in a number of companies. What the title means is that the end user does not buy the software, he buys the service provided by that software. There's still an awful lot of software involved.

There are clear advantages to this kind of outsourcing. The big outsourcing companies have exonomies of scale, they can buy dozens or thousands of computers, all just alike. This minimizes the maintenance effort, they can upgrade the software on all units cheaper than a company can do it on a few machines. It improves reliability, they can use this machine if that one is broken. They can fully understand the laws, such as the privacy laws relating to human resources information. And they have many other advantages.

Unfortunately this does come with some disadvantages as well. For one thing, they use standardized software packages, if your application fits, that's great, otherwise, well....

Then you have to be of the right size. Too small and they're not interested. Too large and you probably have your own legacy systems that switching off may lose you a lot of historical information.

This is an interesting book, well worth reading if you are in the IT department of a middle sized business. It clearly explains the advantages of the outsourcing business model.

6 of 8 people found the following review helpful:

4.0 out of 5 stars On Demand Software with some Oracle perspective, September 23, 2004

By 

Charles Ashbacher (Marion, Iowa United States) - See all my reviews
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This review is from: The End of Software: Transforming Your Business for the On Demand Future (Paperback)

While there are strong arguments in favor of the software on demand model of usage and Dr. Chou makes most of them, he also sometimes descends into a rambling state. There is some repetition and some irrelevancies; my estimate is that ten percent of the material could have been left out. Dr. Chou is the president of Oracle on Demand, so of course he has a vested interest in praising the software on demand model. Nevertheless, he does a reasonably good job of keeping his prose from reaching the level of evangelisms.
The software on demand model is one where the user essentially rents the software on an on-demand basis. When needed, the latest version is either downloaded or run directly on a server. The primary advantage is one of remaining current. The present situation regarding regular security patches is only marginally viable. Nearly all system managers live in fear of failures whenever a new service pack or patch is installed. The recent situation with the latest Microsoft XP service pack is a case in point. When a vendor has to include a list of all the applications that will fail after the service pack is installed and how to get them functional again, then there is a major problem. If the software runs on the vendor's server, then this problem is alleviated.
This will also prevent the current problems with unpatched systems. IT people are generally swamped and the fear of crashes after installing a patch is one of the primary reasons why patches are not applied. Many of the recent systemic viral/worm attacks occurred well after a patch that could prevent it was available.
Of course, there are problems with the distributed computing model. It will require that all vendors have bulletproof servers and connections. It would only take a small amount of downtime or a major security breach to convince many customers that they prefer to have the software on their machines. Also, the current model forces application developers to create significant upgrades. For if they don't, users will continue to use the older versions and the revenue stream will dry up. Therefore, if an oligarchy or monopoly were to develop, innovation could suffer. Finally, since the models for on demand software are not yet clearly delineated, no one knows how providers will interact with their customers. Many people have doubts about how this will work, and the recording industry has recently engaged in some disturbing legal actions. These actions could be unique to the recording industry or a precursor to how the on demand world would function. While Chou does mention some of these problems, they are not delved into in great detail, which is a weakness of the book.
If you are someone whose portfolio includes the planning of organizational software usage, then you should read this book. The strengths outnumber the weaknesses, so if you read it keeping the perspective of the author in mind, then you will learn the most significant aspects of a new way of "consuming" software.