How did you buy software a couple decades ago (for those old enough to remember)?
You went to your local retailer (or back then, they sent a sales rep), you bought a box, with a manual, 20 floppy disks, and a heavy carton. As a software company, you had to pay for the distributor, pay for the cost of packaging, and you asked customers to pay for the products before they were used. The companies that had the most power in the industry were those that owned the “distribution” networks (which back then were store retailers and direct salesforces, if you can believe it).
The rise of PC software obviously changed that – the distribution network was no longer the physical distribution network, it was displaced by the logical distribution called Microsoft Windows. You used what came bundled into Windows, and got a new slug of functionality each time you upgraded. It was a good gig.
But now how do you “buy” software? You go to yahoo.com, or java.sun.com, or opentable.com, and you use what they offer – for free. Software as a service has done more than introduce a technical revolution in the delivery of software (no more upgrades, just hit the reload button). It’s fundamentally changed the business model. (David Kirkpatrick has some good thoughts.)
The first thing the internet did was allow companies to bypass Microsoft’s legendary distribution power. From eBay to Google to opentable.com, the rise of industry standards allowed services to emerge on an open network platform. From community services to dinner reservations, no one can possibly doubt the immense volume and value of innovation delivered through a browser. But the technology, frankly, was less valuable than the services themselves. I did say was.
Frankly, all of these services are trying to outrun Windows Vista and Office 12 – with which Microsoft will once again attempt to recover the distribution advantage, preloading Windows, Internet Explorer and Office with Microsoft content and services. They argue it’s necessary to secure the platform, 3rd parties and government officials argue it’s anti-competitive. You pick.
But there are a couple of trends running counter to this looming force – especially among consumers. The trend is away from the upgrade cycle that benefits this traditional notion of distribution. For example, when’s the last time you upgraded your set top box? The answer’s probably never, and suggests that at a certain level, convenience has more value to consumers than the hassle of upgrading. Or ask a teenager which they’d rather have, a new iPod Nano, or a new PC, I’ll bet you money it’s the former (underlying the global trend that suggests more of the world will experience the internet through handsets than PC’s).
Or finally, as I did last week at a keynote, ask the audience which they’d rather give up – their browser, or all the rest of their desktop apps. (Unanimously, they’d all give up the latter without a blink.) All these trends show a slowing upgrade appetite calling into question the power of traditional distribution. In stark contrast to the value of volume, community and participation.
Now, I have been nothing if not tediously repetitive in stating my belief that volume begets value – best demonstrated by the rise of the free software movement (whose volume is derived from its price, its value from innovation, in all forms). The cost of reaching customers, traditionally the most expensive part of building a business, has largely been eliminated – resulting in massive, global participation. Value’s literally everywhere the network travels, on every device it touches (and it’s subsidizing some very interesting ideas.)
But value is returning to the desktop applications, and not simply through Windows Vista. But in the form of applications that are network service platforms. From the obvious, to music sharing clients and development tools, there’s a resurgence of interest in resident software that executes on your desktop, yet connects to network services. Without a browser. Like Skype. Or QNext. Or Google Earth. And Java? OpenOffice and StarOffice?
If I were a betting man, I’d bet the world was about to change. And that what just happened in Massachusetts, when a state government made what was to me a very rational statement – we will pick an open standard to protect the right of our citizens to access data and services; we will then buy from vendors that support standards – will be a shot heard ’round the world.
Strap on your seatbelts. Volume and value are about to speak…