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Traditionally technology companies in general and software in particular, and recently SaaS companies enjoyed very high gross margin. This high gross margin allowed them to invest heavily on R&D and S&M, and of course high profits, thus these companies enjoyed healthy multiples, etc.

With the cloud, I thought margins would come under squeeze but mostly it resulted in HW and SI's margin coming under squeeze but not Software and SaaS.

What will drive SW/ SaaS margins to come down? Why should SW enjoy high 80's margin?
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