Open Source And the Future of the Software Business

Last updated: 8/4/2002; 5:30:42 PM

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The Future of the Software Business

In a recent essay I alluded to a coming software industry implosion.  In specific I stated:

jsjIf you think about this a bit then the questions clearly fork and become these (among at least 543 other questions):

1. What parts of the software business will survive?
   • Utilities
   • Things that Need Constant Updating
   • Games
   • Very High End Software. Think SAP.
   • What about Microsoft? Sorry boys, Microsoft isn’t going away anytime soon. I’d ammend the the sobriquet “Death and Taxes” to “Death, Taxes and Microsoft”. I do suspect that the best years of Microsoft are now behind them. Just for example, consider what Microsoft’s revenues would be without MySQL, Apache, Postgres and other Open Source tools. Microsoft is going to always bean important company but not the center of the universe that they currently are.
   • What about Apple? There’s no question in my mind that Apple’s going to do just fine with all this. They’ve already adopted an Open Source philosopy at their core. And, when I recently had lunch with John Hurley, the lead security architect for Apple, I was hugely impressed with the degree to which “Apple Gets It”. Still … I said Apple would be ok. I didn’t say anything about Macintosh software vendors (so much Apple software is now bundled with the machine and they are still really a hardware company that uses hardware to deliver software). My suspicion is that Macintosh software vendors are going to be even harder hit than PC software vendors. All that needs to happen is for the Macintosh faithful to realize that X Windows applications, while ugly, are free. Free is a huge compelling advantage.

What Can Software Companies Do?

My guess is that if you are in the software business right now, your head is probably in the sand. You don’t want to admit you are going to become obsolete. You just can’t believe it. And you’ve probably never experienced the pain of a major strategic transition. Still, for those that are listening, here’s what I’d do if I were in your shoes

• Learn lots and lots about Open Source
• Build FANTASTIC customer relationships. When it comes right down to it, spending money with a vendor is a choice. No one has to do it. And good customer relationships make a huge difference in people’s willingness to spend money with you. This means lots of different things including better software quality, less arrogance, more willingess to admit your bugs and more. In case you haven’t figured it out – honesty and accountability are very popular right now.
• Form a services division.
• Cut your costs. I’ve never seen a high tech company that couldn’t cut fat and bloat from it’s bottom line. As a general rule of thumb, high tech companies, except for the very small ones that never got any funding, are not managed well, waste money and are generally inefficient. There’s lots and lots of waste as a natural consequence of our better than average growth rates and high profit margins.
• Roll out hosted versions of your applications. Sure the ASP revolution failed the first time out. So what? It’s still a good idea but a lot of good ideas take time. For example: I started selling hypertext software in 1987. And when did you first use the web? All technology transitions take time and complex ones take lots of time. But good ideas do generally succeed.

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