Ray Lane of Kleiner writes a nice piece at sandhill.com on survival in the software industry. He says you either survive by innovating or by already being a dominant player - Oracle, Microsoft etc. There is not really a middle ground to survive in.
I have known Ray for a while now. We butt heads every once in a while (show me a combination of folks ex-Oracle and ex-Gartner who agree on much at all!), but in general he is one VC who is equally comfortable with CIOs as he is with entrepreneurs and has his finger squarely on the software industry pulse.
He starts with a startling statement. Too many vendors think services (SaaS, SOA) will be their salvation. He recommends other more differentiated paths:
a) Innovate or acquire innovation
b) Verticalize
c) Go open to innovate
d) Innovate your positioning
e) Help Enterprise - CIO - Innovation
His advice is aimed at smaller companies - the assumption is the dominant vendors have years of runway.
It is the last statement I would disagree with. Look at their performance on the 5 items Ray mentions
a) innovation - 75% plus margins and may be 5 to 7% investment in new R&D (not bug fixes, tweaks to older releases), and little innovation to show for it. See my Optimize article here
b) verticalization - all the majors have paid lip service to verticalization. Many industries - from insurance to healthcare - are still wide open as I wrote here
c) open - Sure Shai at SAP loves Open Source! I bet Microsoft loves it even more...
d) positioning - the biggest positioning from SAP is around SOA. And it is grandiose. Microsoft has caught web 2.0 religion - the other big vendors still have somewhat muddled positioning.
e) helping CIOs innovate - most CIOs would say the best way larger software companies can help is to declare an "innovation dividend" through relief from the 90% maintenance margins.
So, my change to Ray's essay would be to say it is the "Innovate-Innovate" imperative whether you are a small or big software company...there really is no safe, dominant vendor ...
