Shai Agassi travels 29 weeks per year, logs 250k miles per quarter, and has almost single-handedly cured application vendor SAP of its thick German accent. He makes the case for a hybrid business model for software in this SF Chronicle interview, defanging the on-demand model that has entranced Wall Street. Here's an excerpt from the interview:
Q: On-demand software, where customers use software that is stored and maintained by another company, is a growing trend in your industry. How big of a threat is that to your business?
A: My personal view is you'll see three consumption models at the end. The first model is where I buy, I install, I modify, I maintain it. It's my system. So I'm independent. Then you'll see the on-demand model. I sign on to the program and I trust you to take me in the right direction. And I trust that the software is not going to die at the end of every quarter.
Then there will be a model somewhere in between that I'm calling the managed appliance model. I want my box, but I want you to manage it for me and so you give me the software. You tell me when there's a wave of upgrades. If I decide to turn it on or off, it's my decision. But I don't need to manage it. You manage it for me.
It's not going to be a binary decision for a company -- do I go to Model A, B or C. It'll be a hybrid across all these models.
Q: There have been questions about security and reliability with the on-demand software companies. Is the on-demand model reliable or are there problems?
A: We also have an on-demand business and we make on-demand secure and reliable. The real issue is again that transportability. Can I take my on-demand system after two years where I paid you monthly, move it on premise, make changes and pay you once? Or is that code designed to be shared with lots of other people and I can't really take that system on premise? That hybrid approach is still not solved by the pure play on-demand sellers, and we believe we cracked that already.
Q: So it doesn't sound like you think on-demand is going to become the future of software?
A: I think it's trendy. I don't think it disappears and I don't think it takes over the world. I think it becomes one more consumption wave. I'm sure you guys wrote a Tom Siebel article four or five years ago where he was supposed to take over the whole software industry.