The End of Software: Finding Security, Flexibility, and Profit in the On Demand Future

Overview

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, ...

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Overview

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.
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What People Are Saying

Geoffrey Moore
The End of Software makes a compelling case for the transition of enterprise computing to the utility-based model. Where others have argued theory, Tim draws on his industry experience to build a fact-based case chock full of war stories and lessons learned. The book creates a common ground where both CIOs and their line-of-business counterparts can meet to think through the application of this new paradigm to their business.
— Author Crossing the Chasm, Inside the Tornado, and Living on the Fault Line
Fred Magner
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.
— Chief Information Officer, Unocal Corporation
Stephen Wong
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.
— Chairman and Chief Executive Officer of Embarcadero Technologies
John S. DiFucci
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.
— Senior Software Analyst, Managing Director, Bear, Stearns & Co. Inc.
David W. Yen
Dr. Timothy Chou is one of the pioneers of the On Demand delivery model. His history and vision of the software industry's evolution should be required reading for everyone in software management. While promoting Oracle On Demand, this book's extensive sharing of experience actually benefits the whole IT industry.
— Executive Vice President, Scalable Systems, Sun Microsystems, Inc.
Michael J. Roberts
Tim Chou redefines the way in which managers at all levels need to think about IT. In so doing, he defines the forces driving fundamental change in the software industry--creating both peril and opportunity for companies in the IT industry.
— Senior Lecturer, Executive Director, Arthur Rock Center for Entrepreneurship, Executive Director, Case Development Rock Center 317, Harvard Business School
Greg Gianforte
Tim has achieved his goal; a thought-provoking view of automation on automation enabling services; an evolving world in IT delivery." Jane Hollen, SVP, Xerox North America Information Management "On Demand software is changing the way corporations consume enterprise applications. In The End of Software Tim Chou presents a convincing case for this disruptive innovation by pinpointing the specific opportunities for increased efficiencies and improved reliability.
— CEO and Founder RightNow Technologies
Vinod Khosla
There is a major change in the way enterprises use technology to enable their business processes in a highly-efficient and cost-effective manner. Dr. Chou traces this shift from its early roots with big IT services outsourcers in the 1960's through to today's "software-as-a-service" delivery models that are fueling fast-growing companies such as Salesforce.com and WebEx."
— General Partner, Kleiner Perkins Caufield & Byers
Steve Printz
The End of Software effectively answers the question, "What's next for the technology industry?" If you want to know where the market is heading, why it's heading that way, and how to best position your company for future growth, Tim's book is an invaluable guide.
— CIO, Pella Corporation
Evan Goldberg
The End of Software is essential reading for anyone who wants to understand why the On Demand delivery model is what's next for the technology industry. Dr. Chou's deep experience with Software as a Service will help you discover how to best utilize this groundbreaking approach in your company.
— Chairman and CTO, NetSuite, Inc., One System
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Product Details

  • ISBN-13: 9780672326981
  • Publisher: Sams
  • Publication date: 5/25/2004
  • Pages: 170
  • Product dimensions: 6.00 (w) x 9.00 (h) x 0.50 (d)

Meet 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.

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Read an Excerpt

IntroductionIntroduction

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 theoperation 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.

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Table of Contents

1. Why Does IT Cost So Much?

Where Does It All Go?

How Much Did I Really Pay?

High (Cost) Availability.

Dealing with Disaster.

The Cost of Security.

Performance: Pay to Play.

Change Management.

So Where’s the Good News?

Choosing Wisely.

The Capability Maturity Model.

Measuring Operations.

Conclusion.

2. What Has the Industry Done About IT?

The Race Is On.

Challenging the Status Quo.

The Human Factor.

Repeat After Me….

Automation.

A Brief History.

Location, Location, Location.

Flexibility.

The On Demand Solution.

3. Location, Location, Location.

The Law.

Any Port in a Storm.

Connecting the Wires.

Infranet: A Corporate-Quality Internet.

Back to Why Location Matters.

What Are You Made Of?

My Place or Yours?

My Place.

Commercial Net Lease Realty @Oracle.

Your Place.

Charles Marcus @Customer.

Conclusion.

4. It’s About the Performance.

Cost of Poor Performance.

Throw Another Box at It.

How Much Do You Need?

I Want It Now.

Enter DebitCredit.

Waste Not, Want Not.

An Appropriate Response.

The Server Is Where?

Virtual Reality.

The Geeky Part.

What the Other Guys Are Up To.

Planetary Scale Computing.

Query on Demand: Google.

Us, Too.

Automatic Performance Management.

Conclusion.

5. You Can Never Be Too Available.

Are You Saying That 99% Isn’t Good Enough?

Making Yourself More Available.

Call the Exterminator.

Beyond the Bugs.

The State of the Art.

Recovery-Oriented Computing.

Building for Recovery.

Suit of Armor.

Fixing the People.

Can I Have a Do-over?

Error Injection.

High Availability in Real Life.

When the Unthinkable Happens.

6. Batten Down the Hatches.

A Reason to Lose Sleep.

Where to Start?

Virtually Private.

Know Thyself–and Thy People.

Password, Please.

Security As Policy.

Audit Planning.

The Next Big Thing.

Availability Meets Security.

Trustworthy Computing.

Sometimes It’s Just Personal.

Conclusion.

7. No Problem, No Worries.

The Impact of Bugs.

Fixing the Process.

Assisting Technology.

Just Try It.

Does It Work?

Working It Out.

Moving Quickly.

Back to the Bugs.

CEMLI.

It’s Still Not Going to Be Perfect.

Faster = Better.

8. The Quick Change Artist.

Let Someone Else Be the Guinea Pig.

It’s a Big Deal.

And Then There’s the Training.

So, Where’s the Upgrade?

This Tape Will Self-destruct in 10 Seconds.

And the Hits Keep Coming.

Whoa, There.

The Lady or the Tiger.

The Clock Is Ticking.

Graceful Change.

Hot Off the Presses.

Constant Motion.

9. Repeal Brooks’s Law.

Brooks’s Law.

The Werewolf Lives.

The Silver Bullet.

The Testing Phase.

Next-generation Testing.

Deciding What to Build.

It’s a Different World.

Moore’s Law.

The Cost of Software.

Software Economics 101.

The Recount.

Bid Now.

10. New Kids on the Block.

Why Does It Work?

WebEx: Web Communication Services.

RightNow: Customer Service and Support.

salesforce.com: CRM for the Masses.

NetSuite: Integrated Business Management Software.

Open Harbor: Integrated Global Trade Management.

Conclusion.

11. The Debate Is the Rate.

Traditional Software Business Model.

Evolution, Not Revolution.

No Baggage.

But I’m an Investor.

Where Is This Going?

Index.

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Preface

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.

Read More Show Less

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  • Anonymous

    Posted September 30, 2004

    skimpy

    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.

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