Optimism & growth sentiments were palpable throughout the software 2007 meet. McKinsey’s Ken Berryman made some insightful closing remarks – these were quite pointed and very interesting as well. Underlying the fact that innovation was the focal theme of the meet, Ken brought a number of related points relevant to the software industry:
• Amongst the various type of innovation, he argued that for the software industry,clearly disruptive change sparks waves of innovation.
• The good news is that in the software industry - the innovative wave of software is markedly on the rise and shows good promise of continuing that way.
• Innovation may not be the panacea for all players in all times – Innovation need not happen at all for a few players under some circumstances - in such cases, status quo and predetermined trajectory might suffice – old models may still prove to be successful.
• The power of the net and the flat world pushes everyone to think bottom-up, not top-down, and recommendation is to use communities to build software more aggressively (open source or otherwise)
• Many roads can lead to the success zone – There are indeed several models for building a software business – everyone of them has merits specific to needs.
• Key advise to software companies – Always seek new source of value. Unless done that way, opportunities to monetize using advertising would have never occurred even as a possibility.
• Its clearly heady times for established players - big & small. The software industry is growing fast, with 30%-50% margins
• Needless to repeat the interest and actual investments being made in software companies from venture and private equity is at an all-time high – consumer spending on software is also getting bigger. Its heady times ahead for the vendors. Would this help in creating significant changes to the industry – we will have to wait and see.
Labels: Emerging Trends, Innovation, Software 2007
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Innovative software ecosystem is propelling the recovery and growth of the high tech industry – this is the key message of the sandhill customer survey of enterprise software users. Pointing out that innovation is happening at the industry level and not at the product level –MR in his opening note at Software 2007 said the innovative streak can be seen in advances in the form of SaaS, SOA, Vertical Apps, Enterprise 2.0, Delivery innovation etc. Taken as a whole – these have far reaching effects when these intersect. 
Such a model of innovation gives more than adequate role for small players to participate and at a time when IT spend is expected to be more or less flattish, the investment commitment made for software in the sandhill.com administered survey shows an increased outlay for software purchase! Good news indeed. This time the event has become really big with internal pavilions & innovation showcase areas. It was good to see Hasso talking about the new SME focused product that SAP is all set to unveil – the key is this is fully centered on on-demand model(though on premise model shall also be supported). Plattner says the yet-to-be-named project involves a completely new code base different from SAP's existing suite - this is a massive one - Hasso says that this has been under development for over three years, with more than 3,000 developers. Key takeaway - The system shall have all services exposed - this means that all features of the software will be accessible either through a Web browser or through “smart client” software - additional functionaliites would be rendered here.
HP’s Shane Robinson succinctly captured the shifts that are happening forcing giants like HP to shift their R&D allocation from software – hardware ratio of 30:70 to 70: 30 today. Some of the shifts he brought out are quite interesting:
Consumer Vs Enterprise to Consumer + Enterprise
Hardware Vs Software to Hardware + Software
Individual Productivity to Communication + Collaboration
Connecting Devices to Connecting users to services
And a few more…
No wonder all the recent acquisitions of HP is in the software field. Mark Benioff was his usual self – very articulate & humorous while the CIO panel moderated by Ernest von Simson, Senior Partner, Ostriker von Simson with Panelists - Neil Cameron, CIO, Unilever; Rob Carter, CIO, FedEx; Patricia Morrison, CIO, Motorola; Tony Scott, CIO, The Walt Disney Company was quite focused and had a great advice to vendors:
Tony Scott,Disney: Drop this "we are the greatest in the world" thing and give me an implementation strategy so I can bring this across my company.
Motorola: 12k engineers and we have tons of software that isn't warranted and indemnified. My plea to the industry is quality. The amount of time we put down bugs.
Neil Cameron,Unilever: Fantastic. Absolutely.
Rob Carter, FedEx: Every time we add something new, we get more cost an complexity. This is a relationship oriented business and you have to cut through the noise, provide technology migration strategies. We just don't have time for all the opportunities that come at us.
Bullishness, growth, innovation, a sense of recognition that small players would also begin to not only survive but also force change on the larger ecosystem – all bode well for the enterprise software industry’s future.
Labels: Emerging Trends, Enterprise Software, Innovation, SAP, Software 2007
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The Sandhill- Mckinsey state of the software report findings & recommendations make insightful reading. The sandhill customer survey shows 59 percent of respondents expect the greatest level of software innovation to come from small software vendors, while only 19 percent believed larger vendors would deliver this level of innovation. The solution in this wave of innovation, writes Mckinsey's Ken Barryman & Sandhill's M.R.Rangaswami, may lie in the bottom-up nature of the innovation diffusion itself – particularly with innovative easy-to-deploy software-as-a-service models, end users and business leaders may take on the role of the IT experimenter and shift the focus and spend on innovative smaller vendors outside of the IT department and into the budget of the line-of-business departments directly. 
In this scenario, the advise to the vendors: They need to adapt to the bottom-up and center-out diffusion model within this innovation wave. Ensure that your investments in product and technology innovation are well balanced with similar investment and focus on business model and process innovations. Focus on the monetization of recent disruptive technologies from this wave, embracing new business models when and where appropriate. Increase your overall transparency to customers and developers and work hard to operate with greater external leverage across your full business system. Well said.
A recently released Gartner report summarises amongst other things the type of changes that are expected to happen on account of the varying changes in technology and customer expectations. It predicts that in the next two years that at least one of the top five IT professional services providers worldwide will have sufficiently mastered the use of SOA and Web services for service industrialization and will permanently alter the cost structure of traditional outsourcing and system integration (SI) business models.
And the Gartner report goes on to predict that in the same timeframe, SOA and Web services will reduce the demand for packaged application implementation services, resulting in the demise of 15% of existing SI vendors, who will not be able to shift to a component assembly business model.
All this points to one thing -elements of change are happening at varying levels and they are waiting for the right moment to fuse together. Clearly the battle for the enterprise IT dollar is getting more and more interesting – this time faster and smarter people stand a better chance – being plain big alone may not mean much here. The customer is definitely going to demand a lot more – justifiably so in this new era of innovation.
Am there in software 2007 and shall be posting on significant things happening there.
Labels: Emerging Trends, Innovation, Software 2007
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