Progress means better process

Ray Lane kicked off this month's Software 2004 conference by throwing into sharp focus what we all know but have never quite expressed: software innovation on a grand scale is dead.

Lane, former president of Oracle and now a general partner at venture capital company Kleiner Perkins Caufield & Byers, compared the approach of today's software superstar wannabes to what happens in more traditional industries.

"If you were in the vehicle industry, you wouldn't start a new car company," he said. The viable businesses in that industry, he said -- and by "viable" he meant billion-dollar-plus revenues -- are the suppliers to the top three manufacturers.

So it goes with ISVs. The chances of revolutionizing the software market today, on the scale of what SAP or Siebel Systems have done, are slim. Consolidation rules. In fact, most startups are looking to be acquired rather than shooting for an IPO home run. At least for the foreseeable future, we aren't going to see another phenomenon like ERP.

Indeed, the current state of the economy seems to have created some new, perhaps permanent, synapses in the grey matter of more than one executive. In the last decade, IT spent three trillion dollars. Now the focus must be on refining all of that technology. And as markets consolidate, today's innovators are there to fill in the gaps, not reinvent the wheel.

In the panel discussion following Lane's talk, Jim Green, CEO of Composite Software, echoed Lane's message that the way people are spending money in IT is changing. Green, former CTO of webMethods, said that in the past the software industry sold its customers a Greyhound bus when all they needed was a Volkswagen.

Panel member Juli Hanna Farris, founder and CEO of Scalix, added, "open source is a way to make up for past sins".

But all the panellists agreed that trends such as open source and offshoring offer only a quick payback. They are not long-term solutions to cost savings.

Green felt that licensing for commercial software also needs to change. Customers should be offered an entry-level licensing deal at lower cost, he suggested; as a vendor proved its value to the enterprise over time, it could negotiate a different pricing structure.

Still, while total IT spending may appear to be flat or down, in fact IT is investing and even growing. The real change taking place, according to the panellists and Lane, is in software as a service: delivering applications -- faster, cheaper, and more nimble -- to an enterprise's Web services-based architecture, rather than delivering proprietary or packaged software.

And more importantly, according to Jeff Rodek, chairman and CEO of Hyperion Solutions, much of the growth lies in process improvements.

In light of this, you can bet you'll soon be hearing a lot more, in this space and elsewhere, about IT and application portfolio management solutions. The idea, as one recent Gartner report put it, is to "balance infrastructure, enhancement, and innovation in IT plans" with IT investment and to align that with business initiatives. Already, companies such as Niku Corp and BluePhoenix Solutions are supplying solutions around this concept.

As Lane put it, the software industry used to grow by looking for the next big thing. "I don't know what the next big thing is," he said, "but while we are waiting we should be making the last big thing work."

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