Emergic: Rajesh Jain's Blog

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Enterprise Software Business Model

June 3rd, 2005 · No Comments

Brij Singh points to a post by Jeff Bussgang: “The enterprise software business model is dead. This is refrain many VCs are mumbling to each other lately. Price pressure is incredibly intense between open source, Microsoft moving up the stack, vendor consolidation, IT buying wariness, the ASP model, overfunding in interesting sectors and many other factors. It used to be that you could build a profitable enterprise software company at the $15-20M threshold. But with today’s pricing pressures and high cost of sale, it seems to have jumped to $40M, and it’s harder to reach that threshold quickly. VC appetite for standard enterprise software appears to be dwindling to nothing.”

Brij adds: “Enterprise software business is tough there is no doubt about this. High cost of selling, distractions with Sarbanes compliance, where-is-the-ROI concerns have made this sector very tough. Though the title is rhetorical, real deal is that the conventional budgeting process for enterprise software is dead. Now its much more diffused across offshoring, open source solutions, outsourcing, DIY-IT, and best-of-breed packages.”

Tags: Enterprise Software

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