The biggest change, Pyle said, is business customers no longer buy software, but essentially rent it by the month -- so clients can jump ship at any time. Therefore, the intense, upfront sales process that went into selling pricey computers or software packages has been replaced by a tricky ongoing, costly and culturally challenging client-service relationship. "I think, long term, it's very sticky," he said. "At the same time, it's very hard. Someone can move from Microsoft to Google ( GOOG) in a heartbeat because there is no long-term contract." Pyle no longer markets features or hardware, but now tries to communicate a sense of service and a knowledge of a client's business that require a startlingly granular commitment to information.
Investors would be foolish to dismiss Pyle as a cloud-based computer fool, unable to soar among the golden opportunities of Web software. In fact, essentially every executive in the cloud space I spoke with confirmed his view. "It is not a 'Get in, sell a deal and get out' sort of business anymore," said James Morehead to me over the phone. He's vice president for product management and corporate marketing for Support.com, a Redwood City, Calif., online software hosting company with more than 2,000 employees. "If you are not fluent in the exact lifetime value of that business partner, what their churn rates are, what it costs to service them, literally down to the email," Morehead said, "this is not the market where you thrive." This new thin-margin, high-touch software business is having a profound effect on which companies merit the investor's dime. Daniel Saks, co-CEO of AppDirect, a San Francisco Web business app installation and management platform, told me it is now sober professionalism that is the deciding factor for which business software app succeeds. "What we are seeing is companies that work through a traditional sales channel and act like a real business are the ones that work," Saks said. "Throwing your app up and hoping folks just figure it out is not getting it done." None of which should surprise Pyle. "If you're doing anything the way you did it even a few years ago," he said, "it gets very tough, fast." "It's like I said. What got you here is not going to get you there."