U.S. vendors shifting to SaaS faster than Europeans

BRUSSELS, BELGUIM–U.S.-based software vendors continue to make greater strides relative to their European counterparts toward shifting product portfolios to software-as-a-service from the traditional license and maintenance business model, noted the co-founder of Truffle Capital, a France-based private equity firm.


Bernard-Louis Roques, co-founder and general partner for IT investments with Truffle Capital, a firm whose goal is to invest in technology spin-offs, detailed research findings to a group of journalists regarding European software clusters and where they stand relative to North American clusters such as Silicon Valley.

“It seems the Americans are going faster in that direction,” said Roques, referring to the greater speed at which U.S. based software vendors are overcoming the technical and business model hurdles presented by a subscription approach to consuming software.

Roques said a sharp shift from the traditional license model can mean an 80 per cent loss in revenue as well as lesser revenue predictability.

Truffle Capital, in collaboration with Framingham, Mass.-based research firm IDC Corp., published in September its annual Truffle 100 list of top European software companies, based on 2009 revenue. Germany-based SAP AG and Software AG ranked first and fourth, respectively.

Roques described the 27-billion Euro software industry in Europe as “resilient” and important to the economy, given its continued growth in the past five years. On of the top four clusters in Europe is Rhine-Main-Neckar in Germany, of which many vendors in that cluster acquired U.S. based companies in 2009.

“It’s an industry that will cut on some costs but not the technical costs,” said Roques. But despite some good fiscal and incentive policies in place, European governments still have some distance to go, he said. “It’s absolutely urgent that we are doing more,” said Roques.

Also speaking was Rainer Zimmerann, head of the software and service architectures and infrastructures unit with the European Commission, who outlined the digital agenda for Europe. The Europe 2020 strategy strives for what Zimmermann called “smart growth” through intelligent products, sustainability and inclusiveness.

“While before information and communications technology was interesting, it is today really vital,” said Zimmermann.

Action areas in the strategy include reinforcing the digital market through software; improving interoperability standards for software and services; network and information security policy; broadband access; and more research and development investment.

For instance, the goal is to provide a one megabit per second broadband access to all Europeans by 2010, and 30 megabits per second access by 2020 to all.

Closer to home, Canada recently presented an open pan-Canadian digital economy strategy that aims to get input from interested parties regarding priorities in this digital age, including broadband access.

Alison Brooks, research director with Toronto-based IDC Canada Ltd.’s public sector division, said that in May the Canadian government announced funding to expand broadband access in rural and remote parts of the country. “Canada has been acutely aware of its broadband access issues,” said Brooks.


Currently, broadband is available to 83 per cent of citizens in populations of more than 10,000, and 73 per cent in populations of less than 10,000. The funding was $77 million for about 200,000 households across the country.

The previous day, Software AG CEO Karl-Heinz Streibich, spoke to the group of journalists about digitization of information as a paradigm. While Streibich expects a complete digitization transformation to take no less than a hundred years (started 50 years ago with the advent of the computer), he said it will be driven by enterprises’ desire for visibility and measurability of results.

“Digitization is driven through intention to measure,” said Streibich. “Measurability is the name of the game.”

Follow Kathleen Lau on Twitter: @KathleenLau

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