by Joe McKendrick
February 8, 2007 at 12:53 am
· Filed under Enterprise 2.0
“The software business is much like the drug business — once you get the needle in, it doesn’t come out.”
Ray Lane, former president of Oracle and partner with Kleiner Perkins Caufield & Byers, didn’t mince any words in his opening keynote at this week’s FASTforward ‘07 Enterprise 2.0 conference, taking aim at the large, established software vendors, including his own Oracle. He observed that the software business is at a “crossroads, with an economic model no longer sustainable.” With the rise of more choices — such as open source, software as a service, and the rise of development in China and India — users and customers no longer have to be locked into vendors’ expensive solutions and upgrades.
Three software and infrastructure vendors — Microsoft, SAP, and Oracle — represent 75 percent of the entire profits of the industry. Their reign is quickly coming to an end as more alternatives come on the market, he said, adding that they won’t be missed. “I haven’t met many companies who said ‘I miss my SAP salesman,’” he said.
A new generation of users — accustomed to on-demand software that can be selected and configured within minutes — also is rejecting the old Big Software paradigm. “Kids today are not on Outlook,” he said. “They don’t even know what it is.”
Lane said the movement to ASP-type or Software as a Service models is a step in the right direction, but many offerings are, at best, simply “software online.”
Lane calls the new paradigm evolving the “Personal Enterprise.” The Personal Enterprise is collaborative, fluid, and based on meeting the information needs of the individual — adapted from consumer applications to enterprise settings. The Personal Enterprise leverages “the power of individuals for the benefit of the enterprise,” Lane said.
[Tags: ff07]
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Ray is absolutely right and the reason is the classic disruption of the software value chain and distribution model. The internet just makes sales people irrelevant since it now inconvenient to have a sales person make us aware that his product exists, give us a demo on his time table, negotiate and conclude a complex agreement, and have him facilitate the delivery of physical media. With lower cost of delivery through open source and software as a service, providers can afford to undercut the existing enterprise sales model.
The faster iteration loop made possible through internet-based interaction also has changed the whole design dynamic making the lumbering closed process of traditional enterprise software a major step behind open source and SaaS.
Having been in both the enterprise model (Documentum) and the open source model (Alfresco), the old model was pretty tedious before and downright frightening now. You should hear the panic coming from the enterprise sales guys lately.
Hal Varian has a good article in today’s NY Times called Kaizen, That continuous improvement strategy, finds its ideal environment.
http://www.nytimes.com/2007/02/08/business/08scene.html?_r=1&oref=slogin
Basically its a great argument against SharePoint and for Otter’s integration of Web services. In a nutshell, Web services can and are continuously improved whereas Microsoft takes literally years – 5 in the case of their OS - to upgrade their software
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ZiaFebruary 14th, 2007 at 11:39 am |
Thanks to Steve for pointing out the Hal Varian article. Not sure if it applies directly to Microsoft; but I do agree that the best companies, experiment from their market leading positions and are therefore more likely to stay ahead. At the fastforward conference in SD, I had the benefit of sitting with Ray Lane and Andrew Schrage over dinner where we had a very heated discussion on Nick Carr and the nature of competitive advantage through IT. While there was by no means any resolution, one concept was generally uncontested. Successful companies use technology to continuously improve and further enhance the inherent business advantage they enjoy. Varian’s article hints at the idea that the most successful Web 2.0 technologies may eventually become the norm; not to say that they won’t matter but that they are embedded into the way a company competes.
This is the 2nd ASP business I’ve started, and it seems like people are still talking about the “on demand software as a service revolution.”
I guess it’s the 10 year overnight revolution.
Woops, did I say “ASP?” I forgot it’s a dirty word now.
I meant “on demand.”
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