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Software is eating the world, and it could eat your business

Bernard Golden | April 29, 2014
In my recent post on IDC's 2014 predictions about how what it calls the "third platform" will radically disrupt the IT ecosystem, I note that the most intriguing prediction addresses how technology users will leverage the third platform to disrupt existing non-technology industries.

In my recent post on IDC's 2014 predictions about how what it calls the "third platform" will radically disrupt the IT ecosystem, I note that the most intriguing prediction addresses how technology users will leverage the third platform to disrupt existing non-technology industries.

Put another way, IDC foresees that every industry will be transformed by application of mobile, cloud computing and social media technologies. In fact, it says up to one-third of the top 20 companies in every industry will be challenged as new or existing entrants use the third platform to change the pricing or processes of the industry. What this means is that companies in nontechnology industries such as auto repair will use the third platform as a weapon against competitors.

Applications

This prediction echoes the well-known 2011 Marc Andreessen Wall Street Journal editorial that proclaimed that software is eating the world. He noted how Amazon, Netflix and Pandora upended the retail, video and music industries by operating, at their heart, as software-based companies.

One might say the events of the past three years have only served to reinforce Andreessen's perspective. Today Airbnb and Uber are reshaping the lodging and taxi industries by incorporating a crowdsourcing twist to their offerings. Creating communities of users and providers, these companies threaten incumbents by coordinating information about the services without having to invest in the resources necessary to deliver the services themselves.

These businesses are asset-light and information-rich. Their growth is starting to bite: One hotel chain recently hired a CIO when it realized that Airbnb's 2013 bookings represented more than half of the total provided by this chain across all of its properties around the world. Plus, once you've used Uber or UberX, it's hard to imagine being satisfied by a standard taxi service ever again.

IDC's prediction that the third platform will disrupt nontechnology industries is dead on. What this really means, of course, is that every company in every industry has to figure out what it means to be a software company, whether it wants to use technology to improve its position or needs to use technology to protect it.

Because You'll Have to Build Software, Decide What to Build

But what does it mean to be a software company? How will IT have to change today's lengthy, manual, trouble-ticket triggered processes to support the requirements of acting like a software company?

The first thing to keep in mind is what kind of software company you want to be: An application or a component. What does this question mean?

Offering an application means you'll interact directly with the end-user and take on all the effort to build an end-user customer base, including marketing and support. Offering a component means you'll provide a service that can be leveraged by many different companies; the component provides a bit of the value the end-user receives rather than all of it. Providing a component means a much smaller customer base — but an opportunity to be exposed to a much larger total user population than you could probably hope to attain on your own. To use a theatrical metaphor, offering a component means you're a supporting player, while offering an application means you're the lead actor.

 

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