The Evolution of the Software Industry

Dan Farber wrote and interesting blog entry (ZDNet Between The Lines) recaping Software 2006 at the Santa Clara Convention Center. He highlights some interesting themes in software industry and how we need to shift to a customer centric mentality. Gone are the days of charging customers maintenance fees to fix our own software. Gone are the days where startups can compete head to head with the big three (Microsoft, IBM, and Oracle.)

I found it particularly interesting to see the characteristics of what Ray Lane from Kleiner Perkins Caulfield & Company is currently investing in.

Opportunities

• White space–not open source ERP
• Low effort improvement–install software faster, for example
• Free now, pay later–trust that the customer will see value
• Individual value–take the mindset of individual in the enterprise

Challenges

• Evaluation cycle–long bureaucratic
• Integration–a integrated platform
• Installability–hours not years
• Value creation–immediate and apparent
• Business model–customer centric
• Renewal

He described the three characteristics of enterprise software companies as follows:

Low resistance
Clear value to user
Immediate value
Short decision cycle

TCO (viral)
Low cost barrier to adoption–get the value and pay as delivered
Encourages viral spread

Intallability (viral)
Easy to install and use
Increased installation increases personal value
Viral effect

He gave iPod, Razor or Palm Pilot as examples of how a viral effect can take over.

The key themes, buttressed by cheaper and cheaper broadband, improved storage, etc.,  for enterprise software going forward include: 

Collaboration
Virtualization
Convergence
On demand
Contextual search
Anytime, anywhere
Anonymous connection
Visualized search