That was one of a series of tough prescriptions he gave during a sobering keynote speech. His remarks were delivered at Software 2006, the annual business conference of the software industry held by angel firm The Sandhill Group.

In his reference to Gmail, he described how Google gives you several email accounts so you can share them with friends or family. And, he continued, Gmail is easy to install, meaning there is low barrier to entry when it comes to implementation.

Translated to enterprise software, he says that software vendors should aim modestly at a few points of entry with functionality that is innovative, yet simple to install. And they should make it easy for champions whom they’ve sold to share it with colleagues, and thereby expand the base of converts virally from within.

Lane’s most controversial point however was on the business model. He suggested that software vendors rely on the honor system, giving their software away initially with the hope that when customers find it valuable, that they will pay up. Admittedly, that’s not exactly revolutionary, as many open source providers like JBoss follow the same model in charging, not for the software license, but for support.

But those comments were not comments were not necessarily universally received. Outside the keynote, we overheard a number of attendees asking how thinly capitalized software providers could realistically afford the strategy in the long run.

Nonetheless, Lane maintained that the industry was overdue for a shakeup, pointing to the fact that three quarters of the profits are concentrated earned by Microsoft, SAP, and Oracle alone (he didn’t count IBM). To rub it in, Microsoft alone counts for half the software industry’s profitability.

One of the heaviest attended sessions was Sonata Software CTO Jnan Dash’s panel on software as a service. For vendors, the challenge is that customers of software as service expect more frequent updates and subscription based pricing. That’s a complete turnaround from traditional models. The difference extends beyond the business model down to the software development process, which requires more concurrent engineering principles.

According to Sand Hill Group president and conference chair M.R. Rangaswami, the software industry in a period of transition to a new business technology, and product delivery model.

It’s the end of the traditional licensing model, but people don’t know yet how to replace it, he said, adding that software vendors should choose whether they are in the product or service business.

Panelists at Dash’s session said that reality wasn’t quite that simple. Deborah Magid, IBM director of strategic alliances noted that for many vendors, customers want it both ways. Some prefer traditional software licensing while others expect software delivered as a service, or combinations of both.

Naturally, as a business conference, Software 2006 couldn’t avoid the issue of globalization. Referring to the fact that India alone now turns out 10 times as many software engineers as the US, Lane’s response was, essentially, ‘do the math.’

But according to Dr C.K. Prahalad, University of Michigan professor of corporate strategy, the fact that there are new development centers emerging means that India, China, and other regions are not replacing Silicon Valley, but supplementing it.

He suggested that Silicon Valley and other established centers could learn practices of low-cost development from offshore centers, much as the offshore centers are dispatching personnel to North America and Europe to gain domain knowledge.

And, showing a map displaying that in India, the centers of software and automotive production are concentrated in the same three regions, Prahalad also suggested that the industries could cross-pollinate each other. Looking five years out, he concluded, The barriers to innovation will get lower.