Salesforce, H-P show where software goes

SAN FRANCISCO (MarketWatch) � �The impact of all new technologies is overestimated in the short term but under estimated in the long term.�

I�m not sure if that quote is a Bill Gates original, but that�s who I heard it from, during a meeting the Microsoft Corp. MSFT �chairman had with reporters in Carlsbad, Calif., in May, 2007.

The more time goes by, the more that maxim rings true, especially regarding software trends � including the advent of online-based software services and changes in software development itself, thanks to open source and so-called Agile development.

Click to Play What Whitman learned from Jobs

A sense of clarity is good for business, Steve Jobs brought that back to Apple in 1998. It's a strategy H-P's Meg Whitman is hinting she's warming to as well, Arik Hesseldahl reports. (Photo: AP)

It�s also one that tech investors would do well to heed today, especially those who own shares of companies such as Microsoft, Oracle Corp. ORCL �or SAP AG SAP .

That�s because those companies, as well as many smaller software firms that also sell to large corporate customers, are at serious risk of having their businesses turned upside down.

The top-line numbers posted by Salesforce.com Inc. CRM �Thursday, both for its fourth quarter and full-year results, show that the changes are well under way. The maker of Web-based business software said sales rose 37% for all of 2011, to $2.3 billion.

The company also raised its outlook for the upcoming fiscal year, forecasting annual revenue of about $3 billion, which represents growth of 32%. This comes as enterprise software firms are struggling to post consistent double-digit growth.

As Hewlett-Packard Co. HPQ �Chief Executive Meg Whitman said on that company�s quarterly conference call in explaining H-P�s year-over-year revenue drop, �the consumption of technology is changing rapidly.�

The democratization of software

That�s another way of saying more people are weighing in on what kind of applications they use at work, and corporate buyers are loath to spend on any software that doesn�t provide a quick return on investment.

H-P was able to post revenue growth of 30% because it acquired the data-analytics firm Autonomy Software for $10 billion last year. Its programs allow companies to uncover data that can be turned into new products and revenue.

/quotes/zigman/338061/quotes/nls/crm CRM 135.75, -6.67, -4.68% /quotes/zigman/20493/quotes/nls/msft MSFT 30.19, -0.52, -1.68%

But H-P�s hardware businesses are struggling to keep up with the pace of innovation. In software too, the pace has quickened.

Open-source development, which uses the combined skills of the broad software-development community to test and improve applications, is creating a proliferation of powerful consumer programs. Many of these inexpensive tools are as useful in improving productivity as the big, expensive software packages installed in older IT systems.

Not all workers have the chance to choose their software, of course; not even close to a majority of them do � yet. They use what the IT department puts on their PC, after paying a license fee that must be forked over every year whether or not it drives productivity gains.