Ray Lane is general partner at Kleiner Perkins Caufield & Byers.
The IT industry is at a watershed. The industry is still based on a proprietary, non modular and “not invented here” approach. This must change now. IT industry must in this sense become like the automobile industry and so on.
2004 will relatively good compared to the last 3 years. Things are getting better. But why is the software industry still so ridden by paranoia?
What is the next big thing? Why is that question always asked when the industry wants to get out of a slump. The next big thing is maybe a decade away.
Is open source or web service a big thing? It doesn’t matter. They shift us into a different meaning of innovation and use and technology that we haven’t seen before.
The IT industry has been built on tectonic events. Transistor, microprocessor, os, pc, internet.
New economy. We had a totally different language to communicate with each other a couple of years ago. We thought that the new economy meant dramatic shift in productivity. All used this vocabulary, Alan Greenspan etc.
New language: Does IT matter? Are there bigger and more important factors. questions posed by e.g. Nick Carr in Harvard Business Review.
How does the entrepreneur create a company in this shifting environment? Very difficult.
People from the sixties and seventies recognize that the current environment is the normal market to do business in. The optimism of nineties was a singular event.
Was the new economy really being destroyed? No, the new economy actually survived big time. Look at Amazon, eBay, teleworkers, proliferation of the Internet.
By the end of the decade most dot-com visions of the mid-nineties will have become truth.
Global peace has been shattered by terrorism. From the predictability of the cold war to the randomness of terrorism.
Market economics has suffered from scandals, bankruptcies. Global growth has stagnated spearheaded by Germany and Japan.
Innovation has become very difficult today? How do you innovate today?
Constraints. Volatile. The world is so unpredictability. How to plan the business with invisible, asymmetric threats from and terrorists and ever more rapidly changing markets. Businesses are transparent. “The public company in a fishbowl”. Low growth. Now you have to focus on profitability and not just growth.
Knowledge work globalization. Outsourcing and free trade. India is not a black box. Things go the way they do in India because of political will to invest in education.
US has do something not to become France where 40% of the work force work for the government!
Network based services providers. Models like salesforce.com are going to become very much more popular.
The vast spending in the nineties is not entirely lost. But you have to persuade these CIOs to invest more. Because of the investment in the nineties you can do much more and have to pay for this.
Portable computing. I can do anything on the road.
The new enterprise has to be able to spot demand. More the ability to shrink than to grow. Not invest in fixed asset like workers and assets. Invest in operational exp. instead of capital exp.
Technology has to service-centric instead of component-centric.
Scarcity. “Management” vs, “engineers”. Now we don’t need more engineers but more clever managers.
To much focus with entrepreneurs on innovation instead of on renovation. To much have been invested in IT. Now customers want to know how to use these investments better and not how to buy new technology.
Now it is all about service. What you start a new car company today or would you start a car service company?
When investing in a new company, find the competence in the business model, outsource everything else. There has to be predictable metrics. Ubiquitous access for everyone not just in Silicon Valley or in the US. Continuos updates to persuade customers to move to your service.
Service-oriented architecture. There are too many databases. The ERP systems have produced too many databases that don’t work together.
Software industry 2001 in the world. 2000 billion USD market, 70 % US share of this market, the market is 1 % of GDP. 325.000 people employed in the IT industry in the US.
Today. Open source software and Web service. Standards are very important. Enterprise adoption with respect to open source software: Lower TCO, equivalent functionality, equivalent quality [and 3 other things that I cannot remember].
Some challenges: informal support, velocity of changes, no roadmap, functional gaps, licensing caveats, ISV endorsements (waiting for ISV to jump the bandwagon)
Software industry in 2010: OSS destruction leads to growth (”Creative destruction”). US share of market less than 60 % maybe less. The same as have happened in all other maturing industries. Less of 1 % US GDP. Less than 325.000 people employed in the US in the IT industry. Lower grow than the economy in general.
Software will be delivered as services. We are moving into the golden age of the IT industry. Open source is the key factor together with with web service in this transition.
A software company has a different DNA a different mentality than a service company.
In a software company a few people are actually delivering software. The rest are delivering services.
