Technology pundits are always on the lookout for “disruptive” changes in the software world, but they’ve consistently missed one of the biggest transformations of the last few years—the greatly expanded role of services. Though there are still major companies (notably Microsoft) that remain almost exclusively product-centric, most successful software vendors these days have adopted a business model that depends heavily on services. Among larger companies, services typically generate more than half of all corporate revenues; for powerhouse vendors like SAP and Oracle, the services ratio often exceeds two-thirds of revenues and a substantially larger share of profits. That shift in emphasis from products to services has happened quietly, but it’s definitely the new economic reality of the software business.
