Software is eating the world.
About a month ago Marc Andreessen, part-owner of venture capital firm Andreessen-Horowitz, wrote an opinion piece for the Wall Street Journal entitled Why Software is Eating the World in which he stated that, although the overall stock market and economy have tumbled recently, the United States is still in a favorable position given the trend of financial success from US-based software companies. In the article he takes an interesting view of software companies – rather than classifying them as simply companies that build and market software, he classifies a software company as any company whose success revolves around their software proficiency.
Today, the world’s largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.
Andreessen argues that the current success of software companies is due to several circumstances. First, more people are connected to the internet than ever, allowing enormous market targeting. With such a large target market, internet firms are adopting flexible revenue streams and variable revenue sources. Companies can receive revenue from subscriptions, one-time purchases, advertising or the sale of data collected – or a collection of all four. Second, the cost of deploying software has dramatically decreased. “In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.”
Other industries that Andreessen claims are dominated by software:
- Video: Netflix, Pixar
- Music: Apple iTunes, Spotify, Pandora
- Gaming: Zynga, Rovio
- Marketing: Google, Groupon, LivingSocial
- Telecom: Skype
- Recruiting: LinkedIn
- Retailing: Amazon, Wal-Mart
Sources:
Why Software is Eating the World – by Marc Andreessen at Wall Street Journal
