No New Software?  Rational Exuberance

All too often, recently, I’ve read articles and weblogs complaining that there is no new software (or no incentive to create new software).  Venture Capitalists are blamed for being unwilling to fund software. Big corporations are blamed for being unwilling to buy software from anyone but another big corporation.  Developers are blamed for being unwilling to take a chance.

But for all this blame game, there is no dearth of exciting new software.  In fact, in a cloud of amazingly rational exuberance, a Renaissance of new software seems to be coming into the marketplace.

Often, it is different, in many dimensions, from the software we saw just a few years ago.

Self Funding

Forget the idea of venture capitalists bidding against each other for the privilege of putting tens of millions of dollars into software companies that barely knew what they were going to do, much less how they were going to do it – or how anyone would make money on the result.  Today’s new software companies are often funding themselves.  They may have had successful service or software businesses with profitable but limited growth potential or they may have built software to make their own services more valuable.  In many cases, they have gotten to the point where they have software to offer to the market (and perhaps an installed customer or two or ten) without taking in even a dollar of VC money.

Web Style Emphasis

Many of thee software products are designed to offer software functionality that used to require big bucks for software ($100,000 and up) plus bigger bucks for implementation services.  But these software vendors have tried to build in a web-based architectural model, with an emphasis on self-service provisioning and administration that allows them to provide a substantial base level of function at a much lower cost, generally on an ASP model.  Of course, for customers that want to be their own ASP’s, most of these software companies can support the software for customer site implementation.

Open Standards

Open standards are no longer an interesting conversation but rather a requirement.  Most customers won’t even consider new software that is built in a proprietary environment.  Open is good, opener is better, and Open and built to Web Services Standards is best.

All Business

Most of this software is aimed at business, not consumers.  In part, this reflects the fact that it’s easier to get funding (to the extent that investors are funding software at all) for business software –consumer-oriented projects mainly popped with the Internet Bubble.  But it’s also much easier to find early partners, distribution channels, and reasonable revenues at reasonable cost when you’re selling products for tens of thousands of dollars to a few customers, rather than trying to sell low-ticket items through highly competitive consumer channels that require lots of expensive advertising and marketing tricks.

As a kind of corollary, much of this software is about infrastructure –the underpinnings of systems, networks, and integration – rather than applications.  Some of this is just the natural fact that when you’re building against a new architecture you require tools and infrastructure first.  Some of it comes back to the funding issue – more funding’s available for infrastructure than for applications.

New Categories Are Getting Started

We’ve been watching with great interest and optimism as some new (or newly revived and refurbished) categories get up and going.  As always, software seems to come in bunches – if there’s one product in a new category, there’s likely to be at least one other.  Recently, we’ve seen:

Management Software – Whether we’re looking at Sun’s initiative with N1 or IBM’s efforts to beef up its management software with additions to the Tivoli portfolio and injections of autonomic computing everywhere, the idea of more management software to help reduce complexity and lower costs is everywhere.

If this is a topic you’re interested in, you might like to read a recent analyst report from Merrill Lynch:  The Coming Era of Managed Computing by Steven Milunovich, which can be accessed at http://cnnfn.multexinvestor.com/download.asp?docid=28005301&sid=2&ticker =IBM&target=%2Fstocks%2Fcompanyinformation%2Fanalystresearch.

You’ll also see related products in nichier markets, like storage management software, from both traditional vendors (BMC, Veritas, et al) and new entrants.

Easy Web Site Creation And Maintenance - We’ve been inundated by vendors offering to show us what they’re doing in this category, including both established vendors with new stuff (Microsoft and Trellix, for example) and brand new players at every level of the market, from consumer plays, to products for service providers, to pure business plays.

Reinventing The Office – Those of you who’ve known me for a long time know this is where I started, so I still keep an eye on office productivity tools, groupware, messaging, and collaboration of all types.  Guess what?  We may be getting ready to reinvent this entire market with new web-based tools which are lighter, easier to use, and much less expensive to both buy and manage.  We’re saving up all our references in a big file, and planning an article soon.

So if you’ve thought that we were running out of new ideas in software, stop worrying.  Smart people are working on all kinds of great stuff.  I’d expect lots of it to surface next year.

And, yes, it is tough out there financially.  Some small firms may find that their best route to market is to sell themselves to a bigger vendor with better financials and a secure customer base.  But is that really different than before – or do we just notice it more now because of the scrambled perspective the industry had in 1998-2000 when everything was seen through the filter of the Get Rich Quick Web?

The rules haven’t changed.  Doing business with small, new companies IS riskier than doing business with big, established ones.  In exchange you get to try new, innovative ideas out early.  For some companies, that risk will pay off in competitive advantage.  For others, waiting for new ideas to go mainstream will be much more comfortable.  Sounds entirely rational to me.  

 

(back to top)  

Comments or Questions: Send Email to opinions@wohl.com

Home/ Search / 2005 Articles / Issue Archive / Free Newsletter

Entire contents © 2001  by Amy D. Wohl. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden.