Why SW is eating the world
Marc Andreessen, 2011
VC that invested in Facebook, Groupon, Zinga, Twitter, Skype, Foursquare,
His View
• Internet, SW companies are building real, high growth, high margin, highly defensible businesses
• We are in the middle of a dramatic and broad technological and eco-nomic shift in which SW companies are poised to take over large swathes of the economy
Trends in biz practices
• Major businesses and industries are being run on SW and delivered as on-line services
• Many of winners are Silicon Valley-style entrepreneurial technology companies that invade or overturn legacy industry structures
Why is this happening now?
• Computer and Internet technologies have advanced across some thresh-old – Over 2B people use the broadband In-
ternet– On back-end, SW tools and Internet-
based services make it easy to launch a new global SW-powered startups with low start-up cost
Example 1: Book
• Fall of Borders – Decline of Barnes and Noble
• Rise of Amazon– The world’s largest bookseller
• 2001, Borders handed over its online biz to Amazon
• Amazon virtually sells everything on-line
• Even books themselves are SW
Example 2: Video
• Fall of Blockbuster• Rise of Netflix, Hulu– And more: Amazon Video and iTunes
• Other media companies are increas-ingly more online-service oriented
Example 3: Music
• iTunes, Spotify, Pandora• 2% in 2004 to 29% in 2010• Traditional record companies play a
diminishing role as a content provider– They provide content to the above com-
panies
Example 4: Videogame
• Fastest growing company is Zynga• Rovio, maker of Angry Birds• Traditional game companies like EA
and Nintendo have been stagnating
Example 5: Movie produc-tion
• Pixar, one of the best movie produc-tion companies, is a SW company.
• Disney has to buy Pixar
Example 6: photo
• Photos in cameras and phones are uploaded to the Internet for archiving and sharing
• Shutterfly, Snapfish, Flickr,…• Kodak had been happy with film
cameras, and now…
Example 7: marketing
• Google• Groupon, Living Social, Foursquare
• They use SW to eat the retail market-ing companies
Example 8: telecom
• Skype: the fastest growing company• CenturyLink (3rd telecom company)
has declined fast• AT&T and Verizon have survived by
transforming into SW companies, partnering with Apple and smart-phone makers
Example 9: recruiting
• LinkedIn is the fastest growing com-pany
• Employees edit their resumes, which are directly searched by recruiters
Example 10: autos
• SW is eating much of the value chain in car industries
• SW runs engine, controls safety func-tions, entertains passengers, guides drivers, …
• Hybrid, electric cars will accelerate the shift
• Driverless cars?
Example 11: logistics
• Wal-mart uses SW to power its logis-tics and distribution capabilities
• FedEx is thought of having the best SW network to which trucks, planes and hubs are attached
• Success or failure of airplane compa-nies hinges on SW– Ticket pricing, route optimization,…
Example 12: natural re-sources
• Oil and gas companies use super-computing for visualization and anal-ysis in exploration efforts
• Agriculture is powered by SW; satel-lite analysis of soils for seed selec-tion
Example 13: finance
• Every financial transaction is done in SW
• Financial SW companies allows any-one to accept credit card payments with a mobile phone
• PayPal allows payments and transfers online
Example 14: defense
• National defense is increasingly SW-based
• A modern combat soldier is embed-ded with a web of SW for communi-cations, logistics, and weapons
• SW-powered drones launch attacks• Data mining to detect terrorist at-
tacks
What next?
• Healthcare & Education• They have been resistant to entre-
preneurial change• But fundamental SW-based transfor-
mation is coming
Also,…
• Companies in every industry need to assume that a SW revolution is coming
• Even SW-based companies as well– Oracle and MS are threatened by new SW
offerings like Salesforce.com and Android
• The battle between incumbent com-panies and SW-powered insurgents will be epic
Challenges (1/3)
• Every new company is being built in the face of massive economic head-winds– A successful company will be strong and
resilient and will grow even faster when economy becomes stable
Challenges (2/3)
• Many people lack the education and skills to join new SW-powered companies
• Every company is starved for people with talent
• Qualified SW engineers, managers, mar-keters, salespeople will be invaluable
• While national unemployment will soar• The more SW penetrates the industry,
the less employees will be required
Challenges (3/3)
• The new companies need to prove their worth
• Build strong cultures, delight cus-tomers, establish competitive advan-tages
• Justify their rising evaluations