A variety of market and resource barriers are retarding development of more scalable, production-quality application software.

Despite the rise in global competition and HPC's proven ability to accelerate innovation and increase productivity, HPC remains a niche market with much smaller revenue opportunities than the larger commercial computing market. This lowers the research and development capital available to develop next-generation HPC application software and lessens the opportunity for ISVs to obtain investor funding for HPC R&D. It also heightens the risk that ISVs could be “bought out” by companies, which might restrict or eliminate access to their software by U.S. commercial and national security organizations that depend on it.

As for-profit companies, many of which are public, the ISVs often must pursue the broader commercial computing market with its larger revenue opportunity. In addition, according to the Council’s 2005 Study of the ISVs Serving the High Performance Computing Market, Part A: Current Market Dynamics,⁴ more than a third of the ISVs qualify as small businesses, earning less than $5 million annually. Even if these companies were to invest 10 percent of their revenue in research and development, this would be sufficient to add only a few new features to existing HPC applications. Fundamental rewrites of application software or the creation of new software for the HPC niche market require far more investment than this.

The niche status of the HPC market also reduces the potential for outside investor funding for the ISVs that serve the HPC community, eliminating another possible source of research and development resources. Additionally, unlike software developers who serve the broad commercial computing market and can keep their prices low by amortizing their research and development costs across a large user base, the ISVs that serve the HPC market do not have a correspondingly large customer set against which they can amortize their expenses. As a result, the ISVs must shoulder the cost of a major software redesign or spread it across a small user community, significantly increasing the price of the HPC application software.

In today’s market, ISVs typically sell unlimited annual-use licenses, often on a per-user or per-processor basis. Users often find that they cannot afford the additional software licensing fees that apply when they want to run their problems over more processors. This discourages them from running larger, more complex problems on their current systems or adding additional processors. As a result, users don’t exploit the applications to the desired and needed degree.

In addition, annual software license fees can be prohibitively expensive for the small and mid-sized companies that dominate the U.S business landscape – the same companies that represent the potential growth market for HPC. Most cannot afford HPC systems and software, nor do they want to deal with the complexity of this technology. Many only want access to HPC systems, software and expertise on a periodic basis. “The analogy,” explained Paul Bemis, vice president for marketing at Fluent Inc., “is you’re going to rent a car for the weekend. You go to Hertz and they say, sorry, all we offer are annual leases. But you only need the car for the weekend. Sorry, they say again, all we offer are annual leases. That is the ISV community today. It needs to change. We need to be asking, ‘How much do you need and how long do you need it?’ ”
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An interesting service model has evolved in the oil and gas industry that may provide an analog. This industry is dominated by small, independent businesses that are the primary producers of oil and gas in this country. These small companies rely on service firms to perform their complex seismic computations and reservoir simulations. The service firms, populated with experienced engineers and scientists, have bundled their knowledge of the industry, their ability to create and use HPC software, and access to HPC systems. With these, they have created very profitable consulting businesses. This business model produces much higher margins than software development alone, because it delivers what the small oil and gas companies value most: access to industry expertise and advanced HPC tools in order to make decisions, without having to invest in the underlying technology. This permits even the smallest oil and gas companies to match the technical capabilities of larger competitors.