The 8 'Rules' Of Software That Need To Be Broken
Rule #5: Software must be financed from the capital-expense budget.
Solution: The move to software as a service is making op-ex software budgeting a viable option.
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Greg Gianforte, CEO, RightNow Technologies
Similar economic logic applies to enterprise applications. Why should companies invest millions of dollars in server infrastructure and IT staff when a SaaS vendor can relieve them of those burdens? All they need is access to the software functionality. As a SaaS provider, we believe a company is better off saving money and eliminating technology-ownership headaches by paying for use of the software as an operating expense.
The conversion from cap-ex-intensive internal deployment to the op-ex/SaaS model improves cost allocation as well. When you have a centralized IT organization baby-sitting a high-maintenance application infrastructure for all your lines of business (LOBs), it's hard to know where your budget is really going. How much of your IT labor and utility costs do you allocate to each application? How much time and effort would it take to assess such chargebacks in a way that would be both accurate and defensible? With SaaS, such allocation is simplified.
In most cases, LOB managers are buying SaaS applications directly from vendors anyway out of their operating budgets because their IT departments have become bottlenecks, rather than enablers, for technology acquisition and deployment.
For these reasons and more, we believe that software as a capital investment is on its way out.
By Greg Gianforte, CEO, RightNow Technologies