On 29 September, Tibco, a provider of middleware / infrastructure and business intelligence software, agreed to be bought by Vista Equity Partners for approximately US$4.3 billion. Saugatuck sees this as another proof-point resulting from the expanding adoption of cloud-based offerings. Traditional software providers (ISVs) are experiencing formidable challenges and mixed success in transitioning their businesses to the realities of cloud application development, delivery, and purchase.

Why is it Happening?

For seven years Saugatuck has published research focused on the motivations and challenges traditional ISVs face in transitioning to cloud-based offerings. Some of those challenges have been mitigated over time; today more usage-tracking and customer billing alternatives with richer functionality and more readily available best practices for structuring cloud-based development are available. However, some challenges remain. It is Saugatuck’s belief that Vista’s decision to take Tibco private is likely a reaction to two of these remaining challenges:

  1. Transitioning from an on-premise software sales process and software revenue stream to a cloud-based reality is a major challenge, and
  2. Balancing the needs of current customers while at the same time pushing to reach and retain new customers: the economics of a subscription-based business model necessitate active customer retention efforts. This means that traditional ISVs have to find a careful balance between transitioning their legacy customers into the subscription model as quickly as possible without losing them.

Click here to read the Market Impact.

Originally published at Saugatuck Lens360 Blog on October 3, 2014. Published with permission.

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