November 24th, 2015 - By: Tom De Schutter. "the world's largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online," "Today's largest video service by number of subscribers is a software company:" "Today's dominant music companies are software companies, too: Apple's iTunes, Spotify and Pandora." For the first time ever, on LinkedIn, employees can maintain their own resumes for recruiters to search in real time — giving LinkedIn the opportunity to eat the lucrative $400 billion recruiting industry. Joseph Schumpeter, the economist who coined the term “creative destruction,” would be proud. In 2014, Microsoft open source’d .NET on GitHub and saw a spike in contributions shortly thereafter. Google, Amazon, Facebook). In today’s cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. Marc Andreessen on Why Software Is Eating the World – WSJ.com. — had to buy Pixar, a software company, to remain relevant in animated movies. Denning: At Etsy, they are constantly measuring the impact of everything they do and can see immediately whether something is improving things or not. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. Software is breathing life into the world. It has lessons in terms of trust and delegation and removal of organizational barriers. nature of the firm & evolving institutions, The Pmarca Blog Archive Is Back… as an Ebook, a16z Podcast: Software Programs the World, a16z Podcast: Startups and Pendulum Swings Through Ideas, Time, Fame, and Money. How Etsy issues 30 software upgrades per day, Another workplace of the future: Sun Hydraulics, The best-kept management secret on the planet: Agile. And the success or failure of airlines today and in the future hinges on their ability to price tickets and optimize routes and yields correctly — with software. The trend toward hybrid and electric vehicles will only accelerate the software shift — electric cars are completely computer controlled. End-to-end prototyping to the rescue. With scars from the heyday of Webvan and Pets.com still fresh in the investor psyche, people are asking, “Isn’t this just a dangerous new bubble?”. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. An in-depth exploration (~30k words) of how software is eating the world, based on research supported by Andreessen-Horowitz in 2014. If you continue browsing the site, you agree to the use of cookies on this website. Are these just good ideas by employees? The reality is that most firms today, whether they know it or not, are already software companies and will steadily become more so. My book, "The Age of Agile" was published by HarperCollins in 2018 and was selected by the Financial Times as one of the best business books of 2018. The essays are free to read online. I am currently a director of the SD Learning Consortium. When you have two seemingly opposing models, the choice isn't to either choose one or the other or to compromise. So Marc Andreessen claimed almost 10 years ago when he spoke about how all major business activity was being built into software and organisations that embraced this change were becoming more efficient and building a strong and sustainable competitive advantage (e.g. It’s not an accident that many of the biggest recent technology companies — including Google, Amazon, eBay and more — are American companies. Marc Andreessen became the godfather of the Internet browser when he founded Netscape back in 1994. Straub: What would be the learnings beyond this specific software development process? It’s virtually impossible to buy a mobile phone that doesn’t include a software-powered camera, and photos are uploaded automatically to the Internet for permanent archiving and global sharing. Meanwhile, traditional videogame powerhouses like Electronic Arts and Nintendo have seen revenues stagnate and fall. But too much of the debate is still around financial valuation, as opposed to the underlying intrinsic value of the best of Silicon Valley’s new companies. Photography, of course, was eaten by software long ago. Today’s fastest growing telecom company is Skype, a software company that was just bought by Microsoft for $8.5 billion. LinkedIn is today’s fastest growing recruiting company. One company I know has a backlog of almost a thousand suggested improvements. In today's cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. “Why Software Is Eating The World” is an article written by Marc Andreessen for The Wall Street Journal. Software and context is transforming products. Rovio, maker of Angry Birds, is expected to clear $100 million in revenue this year (the company was nearly bankrupt when it debuted the popular game on the iPhone in late 2009). BestReviews. Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale. “Software is eating the world,” wrote Marc Andreessen, co-founder and general partner of venture capital firm Andreessen Horowitz, in an essay published in The Wall Street Journal in 2011. Denning: Etsy is constantly monitoring the impact at the local level and at the system level. “Why Software Is Eating The World” is an article written by Marc Andreessen for The Wall Street Journal. Today’s fastest growing entertainment companies are videogame makers — again, software — with the industry growing to $60 billion from $30 billion five years ago. June Javelosa January 30th 2017. I consult with organizations around the world on leadership, innovation, management and business narrative. I am also personally an investor in LinkedIn.) And after it's happened, there's no going back. All Rights Reserved, This is a BETA experience. What Etsy is doing is only possible with continuous automated testing and measuring of everything that is done. Instead of constantly questioning their valuations, let’s seek to understand how the new generation of technology companies are doing what they do, what the broader consequences are for businesses and the economy and what we can collectively do to expand the number of innovative new software companies created in the U.S. and around the world. Now even the books themselves are software. It is to come up with a creative resolution of the tensions in such a way as to create a better outcome than either. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. Do it continuously and fix the little problems that arise after the fact. Now it’s been joined by Groupon, Living Social, Foursquare and others, which are using software to eat the retail marketing industry. 15 Smart Ways For Agencies To Use It, Seven Steps These Entrepreneurs Wish They Would’ve Taken Before Starting Their Businesses, SEO In 2021: Five Trends That You Need To Know (And Master), To Unite As A Nation, We Need To Begin With The Truth, The Workplace Of The Future: How Etsy Does 30 Upgrades A Day. And the creation of software-powered driverless cars is already under way at Google and the major car companies. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries. But it requires changes in the fundamental assumptions around the problem. The world was impressed. This problem is even worse than it looks because many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again. The titel of this post comes from an essay in the Wall Street Journal written by Marc Andreessen. Industry revenue from digital channels totaled $4.6 billion in 2010, growing to 29% of total revenue from 2% in 2004. (I am co-founder and general partner of venture capital firm Andreessen-Horowitz, which has invested in Facebook, Groupon, Skype, Twitter, Zynga, and Foursquare, among others. The implications of this trend are very significant for companies. Running that same application today in Amazon’s cloud costs about $1,500 a month. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. But in many industries, new software ideas will result in the rise of new Silicon Valley-style start-ups that invade existing industries with impunity. In short, software is eating the world. © 2021 Forbes Media LLC. Software Is Eating the World. Networked organizations using agile management practices with a culture of trust, delegation and collaboration are able to move and innovate much more rapidly than traditional managements that are saddled with legacy cultures of hierarchical bureaucracy, slow-moving processes with approvals up and down the chain, and the structural barriers of organizational silos. If they keep growing and adjusting at the current pace, it may well be that they will have to review the architecture at some point. You may opt-out by. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant. Originally published in The Wall Street Journal on August 20, 2011. That's right: Software is delivering fresh, natural and high-quality food in situations where only junk food was available. Traditional record labels increasingly exist only to provide those software companies with content. If they perform to my and others’ expectations, they are going to be highly valuable cornerstone companies in the global economy, eating markets far larger than the technology industry has historically been able to pursue. Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. It’s true that many big old companies are still operating much more slowly. As Marc Andreessen quipped in 2011:  “Software is eating the world.”. Software is removing barriers. In short, software is eating the world. At faculty, we are pioneering both Software 2.0 and … Opinions expressed by Forbes Contributors are their own. They don't have to be perfect if they are very small. It's an integrative solution. More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. How Netflix eviscerated Blockbuster is an old story, but now other traditional entertainment providers are facing the same threat. Today’s stock market actually hates technology, as shown by all-time low price/earnings ratios for major public technology companies. 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. CenturyLink, the third largest telecom company in the U.S., with a $20 billion market cap, had 15 million access lines at the end of June 30 –declining at an annual rate of about 7%. That sort of thing just isn’t possible in our field. More than 10 years after the peak of the 1990s dot-com bubble, a dozen or so new Internet companies like Facebook and Twitter are sparking controversy in Silicon Valley, due to their rapidly growing private market valuations, and even the occasional successful IPO. Kindle ebook $4.99 Introduc… My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy. Zynga’s first-quarter revenues grew to $235 million this year, more than double revenues from a year earlier. But that’s not because of the inherent nature of the work. Steve Denning: We are talking about improvements to the site, not just fixing 30 bugs per day. And while people watching the values of their 401(k)s bounce up and down the last few weeks might doubt it, this is a profoundly positive story for the American economy, in particular. While Microsoft [MSFT] issues an upgrade of its Office program every couple of years, and Salesforce [CRM] issues upgrades several times a year, newer billion-dollar businesses like Etsy are showing that continuous delivery with issue multiple high-quality upgrades every day is not only more productive: it creates a better workplace. So here, option one is update very infrequently, which avoids burnout but migrates the site very slowly, which is bad for customer value. Groupon generated over $700 million in revenue in 2010, after being in business for only two years. For many years I worked at the World Bank, where I held many management positions, including director of knowledge management (1996-2000). It's just that Etsy doing it a hundred times faster than in manufacturing. Can you still find out a likely causality for performance improvement or degradation? Their competence in … Software Is Eating the World, And You Need to See It. Everything here moves much more slowly.” This ignores the fact that most firms' core systems and processes are already run on software. Secondly, many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. What Tools Do You Need To Fight Ad Fraud? Capitalism’s process of creative destruction then takes over: knowledge can’t be put back in the bottle. In today's cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. Straub: What is the overall framework in which the decentralized decisions by individuals or small teams are made? Sign up to get our best articles, latest podcasts, and news on our investments emailed to you. Today’s largest video service by number of subscribers is a software company: Netflix. I write about Agile management, leadership, innovation & narrative. They operate in the background without the customer seeing. Software Is Eating The World. Netscape’s open source offspring Firefox is still … Even national defense is increasingly software-based. Integrative solution:  Change the way you think about updates. Why Software Is Eating The World News Corp is a network of leading companies in the worlds of diversified media, news, education, and information… www.wsj.com Comcast, Time Warner and others are responding by transforming themselves into software companies with efforts such as TV Everywhere, which liberates content from the physical cable and connects it to smartphones and tablets. Firms are learning the hard way that software requires a different way of running the organization to be successful. Oil and gas companies were early innovators in supercomputing and data visualization and analysis, which are crucial to today’s oil and gas exploration efforts. That would be a separate improvement project, which of course would take more than a day. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Companies in every industry need to assume that a software revolution is coming. You might say that Etsy is rediscovering what Toyota discovered several decades back, namely, that short cycles of production can be more efficient and effective if they are used for learning. A couple years ago, Marc Andreesen famously remarked that “software is eating the world” – that traditional industries have been and are being updated by new businesses focused on developing primary technologies – software – to revoutionize specific markets, one by one. He included several vivid illustrations, e.g. The modern combat soldier is embedded in a web of software that provides intelligence, communications, logistics and weapons guidance. Software is eating the world. On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries — without the need to invest in new infrastructure and train new employees. It's true that with a large releases you know if it has gone right or wrong, but often it's not clear what is the source of the problem. Excluding the revenue from its Qwest acquisition, CenturyLink’s revenue from these legacy services declined by more than 11%. In today s cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. Groupon Investor Marc Andreessen: 'No Tech Bubble' In an … 13 Ways To Better Keep Stakeholders In The Communications Loop, 13 Phrases That Will Make A Sales Script Sound ‘Canned’, Marketing Budget Surplus? […] This is a tragedy since every company I work with is absolutely starved for talent. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. Today’s dominant music companies are software companies, too: Apple’s iTunes, Spotify and Pandora. 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