The Future of Software is in Data

Stephen O'Grady on Software's Future Direction

Thanks to a fellow colleague at work I had the chance to read a great blog post from Stephen O’Grady at http://redmonk.com/sogrady/2011/05/24/the-age-of-data/, Welcome to the Age of Data: My OSBC Talk. The basic overview of this post is that we have entered the fourth generation of software producers where the focus is data not software. The earlier generations focused on hardware (IBM), software (Microsoft), differentiation (Google), and now the value is data (Facebook, Twitter).  He also discusses the issue of software companies making it into the Top 20 on Fortune 500 industry listing as well as no software company founded after 1989 being in the PwC global 100 list.

The fact that no “new” software company is on the list is an indication that most post-1989 companies have not been true software companies but rather Internet startups that for the most part are really just electronic newspapers. For example, Google may offer all sorts of solutions on the web but the primary revenue model for them is advertising; thus the more people on Google’s pages, the more eyes on the advertisements. This is just a shift of the old magazine, newspaper, and television model to a new delivery medium. Another example, is eBay a software company or an auction house? The company is not selling its software but rather is a standard for-sale listing tool that has moved from newspapers to the Internet.

Of course, those companies that are focused on just software are either focused on an extreme market niche trying to deliver innovative solutions or are open source competitors who make money via services. Stephen argues that companies in this business model should shift their thinking into leveraging the data collected from their customers as a new revenue stream. This may be the solution that software companies need to overtake the existing Top 20 revenue earners. I’m not so sure that I see this as a valuable solution for software companies as people and companies are just now starting to understand the issues associated with having your data sold or leveraged for the benefit of the data collector and not the owner.  He lists Facebook and Twitter as two companies in the Fourth Generation “data” category that are all about data. In this example, we are again looking at newspaper companies on the web and not really true software companies. Each is not selling a software product but rather is attempting to capture eyes on page.

What do you think? If data is truly the future for software companies, then maybe we need to define what a software company is? Do you disagree with my thoughts on eBay, Google, Facebook, and Twitter being newspapers and not software companies? Looking forward to your thoughts on this excellent blog post from Stephen O’Grady.

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Copyright © 2011 IDG Communications, Inc.

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