The coronavirus crisis is force-feeding 2 big changes into the stodgy enterprise software market. Here’s why some startups are already benefiting.

Slack CEO Stewart Butterfield poses for photos outside the New York Stock Exchange before his company's IPO, Thursday, June 20, 2019.

A pair of trends going on in the enterprise software business may help it weather the coronavirus crisis, Jai Das, an industry expert, told Business Insider.
The shelter-in-place orders and the economic downturn have spurred interest in cloud-based software as an easier-to-manage, less costly alternative to running applications in corporate data centers or workstations, he said.
Many recent enterprise software companies bill customers based on how many employees they have using their software, a model that could expose them to big revenue cuts with corporations slashing their workforces.
But some software makers are moving to usage-based billing models, which could limit the losses, Das said.
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The enterprise software sector is already starting to feel the impact of the coronavirus crisis, but a pair of trends may help buoy the industry, one expert says.

The widespread shelter-in-place orders have spurred demand for software and services that run in the cloud rather than in corporate data centers, said Jai Das, president and managing director of Sapphire Ventures, which focuses on enterprise software startups. Meanwhile, software makers are moving from per-person billing models to usage-based ones, which could limit the damage to their revenue from customers cutting their staffs.

“Everybody saw a slowdown in April” as the pandemic throttled business activity, Das said. But because of such trends, “it wasn’t like completely the world [was] cratering. That didn’t happen.”

Many big companies have long operated their own data centers where they host applications and corporate information. But for many, the COVID-19 outbreak has made those setups seem more like a liability than an asset, Das said. Offices have been closed around the nation and world in an effort to limit the spread of the virus, which has made it difficult to get IT managers into corporate data centers to keep them up and running, he said.

In the past, some companies have turned to outsourcing firms such as Infosys to manage their data centers. But with many corporations slashing their budgets in response to falling revenue during the crisis, the cost of operating data centers, even under outsourcing arrangements, is coming under close scrutiny, Das said.

Most recent enterprise software startups host their applications in the cloud rather than on corporate servers or individual workstations. Now, according to Das, established companies are starting to see cloud-based technology as cost-competitive, less headache-inducing alternatives to managing their own data centers.

Companies are saying: “That is a budget that we don’t need to spend, let alone having the people there any more,” Das said. In terms of the applications they choose and use, he continued, “people are trying to move those as quickly as possible to the cloud.”

Usage-based pricing could replace per-user billing

In recent years, many enterprise software companies have moved to a subscription-based business model, charging customers monthly fees on a per-user basis. The danger of that model in an economic downturn is that with many companies laying off substantial portions of their staff, enterprise software makers could see their revenue slashed. A company that …read more

Source:: Business Insider


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