One of the most interesting recent announcements in this industry came from Adobe. This was that the company was to make 600 full-time staff redundant and cited as the reason for this the weaker than expected demand for the recently released Creative Suite 4. It may be that the credit crunch has stopped existing users of Creative Suite 3 or earlier versions from upgrading to CS4, or new users from buying the product, but the software bubble may be close to bursting
The software bubble is what is happening when major software suppliers that are dependent upon continually introducing upgraded versions of software for ongoing revenue, find customers are not taking up offers to update their systems.
The major software suppliers are continually adding new features to their software packages and endeavouring to get their customers to keep buying the latest versions of the software. It is not just Adobe that is seeing users not upgrading their software. Most software suppliers are in a similar situation. Microsoft has found that many Windows users are happy to stick with existing XP or earlier versions of Windows rather than moving to Vista, and in future one may ask will users move to Windows 7. In fact many of the new software releases require computers to be upgraded before they can operate. For example in my case my two-year old Dell laptop cannot run Vista even if I upgrade it to its maximum memory. It also has no chance of running Adobe Creative Suite 4. We are also seeing many Microsoft Office users not upgrading to the latest Office 2007/2008 software, and still using earlier Office applications. In fact I find when I send out articles I have written using the latest version of Microsoft Word that generates a .docx file, that many of my publishers around the world cannot read this type of file. I then have to revert to the standard .doc format that started before Office 97.
With the credit crunch I think we may see a major rethinking of how we buy and use software. The cost of both buying and upgrading software may well be seen as an unnecessary cost. Today there are alternatives to buying software from major software companies. This includes office applications like Microsoft Office, and print and publishing applications like Adobe Creative Suite and Quark Xpress, where alternatives are available through Open Source Software (OSS) offerings. In the office area Open Office offers an alternative to the functionality of Microsoft Office, with applications for writing and desktop publishing, mathematical formulae, presentations, graphics and diagrams, spreadsheets and database with queries and reports. For publishers in the areas of page layout there are alternatives to Adobe InDesign and Quark Xpress with products like Xclamation, Passeportout and Scribus. We also see Open Source products like the Firefox browser and Thunderbird e-mail system. Most Open Source Software is widely cross platform and available in multiple languages.
This brings the questions about what may happen when budgets get cut and publishers think about how to make savings. The first thing they do is to stop updating their systems. For those of us who have been in computing since the days when IBM was the only solution, Intel hadn’t started, and Bill Gates was still in infant school, the ethos was “if it ain’t broke, don’t mend it.” If your system works why change to get new facilities you haven’t asked for, and which may cause you a period of grief while you try to get the new system to work. The second thing is if you are thinking of a new system should you think of paying for a software licence for 200 seats for a leading system supplier, or do you pay nothing and use Open Source Software like Scribus and Open Office.
At this time the Open Source Software lacks the great GUIs of the leading suppliers’ software, and it may be more equivalent of their earlier versions of the main suppliers’ products. However all such systems require integration and linking with other software. At this time there are many suppliers that integrate products like Adobe Creative Suite or Quark Xpress into total systems. It must only be a short time before integrators link Open Source Software into complete systems.
This would cause major problems for companies like Adobe and Microsoft. They rely much more on upgrade sales than development of new systems. When in fact did either of these companies develop a new software application? The last new product developed by Adobe was In Design. Most new applications from Adobe have been through acquisitions like Macmodedia. Likewise there have been few new applications from Microsoft. Perhaps there are no new killer applications to be developed, or perhaps these companies lack the visionaries to identify new business opportunities.
The question I must pose is has the software bubble burst? Is there a future if your software business is built around an ongoing upgrade business rather than the development of new business applications? Is Open Source Software going to be a major area in future for organisations to develop new business operations around when the credit crunch starts to bite even harder? Today there is a wide availability of expert low cost programmers who have skills to customise Open Source Software and built it into an integrated network.
How many users I ask use more than 10 per cent of the functionality of their software and would they find a no cost or low cost alternative satisfies their needs? What we are however seeing is major organisations are looking at cost savings in the IT area. An early user of Open Source Software was investment company E*Trade and by the end of 2002 they were saving $13 m a year through use of such software.
In the above I am not taking account of the likely future technology changes as we move more to an internet computing environment largely funded by advertising. Cloud computing will make use of much Open Source Software, and the Google approach to computing will largely be funded by targeted advertising. The challenge to the major software companies is finding how their business will operate when major software users stop regular systems upgrades and look more to alternative approaches to their ways of doing business. Unless companies like Adobe and Microsoft start to bring totally new applications to market it is likely that the software bubble will burst.
