"Collapse the supply and support chain"

Phil Wainewright reports on Tim Chou's presentation at SaaScon. Tim led Oracle's application hosting division — originally called Business OnLine, now Oracle OnDemand. He also authored The End of Software, and now lectures at Stanford University on SaaS.

Some of Tim's comments:

"On the vendor side, out of every dollar a customer pays, about 15c typically goes towards research and development. But how much of that is writing new software?Probably only 3c goes on new development. The rest of it is testing, back-porting releases, bug fixes, etc. 

"Looking at the rest of that dollar, 25c goes on support. 40c is spent on sales and marketing. And most of that money is spent, says Chou, because vendors are "fundamentally disconnected from their customers." The challenge for vendors is to "collapse the supply and support chain."

"Customers are now asking, "What's the best method of compensating my sales people?" Not "What is the best platform to run your software on?" or "Should I go .Net or Java?"

""Development communities and networks that allow people to build new software are just on the horizon. I like to say to people today, software is free."There are 15 million programmers in the world, and their numbers are growing, especially in Asia,"

But what does he know. He is ex-Oracle -)