In 2005, Optimize Magazine asked me to "square off" on the topic of enterprise software innovation against David Thomas of the Software and Information Industry Association. I wrote that if the Red Cross only contributed 10-15% to charity we would freak out. We would be demanding to understand where the rest was going. But we have accepted the fact that software companies only spend 10-15% in R&D and product development.
Jason Carter has spent some time analyzing the share of maintenance revenues that is going towards R&D. And the R&D investment has declined further in many software companies since my lament in 2005.
And let's not forget very little of that goes towards new product development. Much goes into bug fixes, regulatory updates, re-platforming of releases, translation to multiple languages. Little net new functionality.
Hold on, you may say - the investment is in the 20s, not 10 to 15%. Note that he leaves out license revenues in the denominator.
He also points out that SaaS vendors are just as bad as on-premise vendors. To which my response is if you added hosting, upgrade, database costs, application tuning and support costs to the denominator for on-premise costs (since those elements are included in SaaS pricing) we would need a microscope to see how little is going into their R&D.
