MySpace bought HP servers, but Facebook doesnt. That market will commoditise too, as cloud that uses software not hardware redundancy doesnt need the high margin features.
And the future of business software is gradually being built by Salesforce, Google, Dropbox and so on. The landscape will change drastically.
While there is innovation in clients, owning a platform is still part of a viable strategy. There is still an opening for a business friendly platform, as Microsoft can still lose and RIM is weak.
> the future of business software is gradually being built by Salesforce, Google, Dropbox
What color is the sky on your planet?
Enterprise software -- the largest software market by a long-shot -- is not scared of ... Dropbox. That's like saying that cars will be wiped out by lawnmowers. The statement doesn't make any sense. Nor does using Facebook and MySpace as examples of enterprise infrastructures. They're medium sized companies with disproportionately large infrastructure needs. What happens at Facebook says virtually nothing about what happens at Mercedes. And nobody in the enterprise trusts Google since enterprise software is all about managing worst case scenarios, and Google's "here, talk to a robot" isn't even in the same galaxy as an acceptable partner program for the enterprise.
Salesforce is the only one of those companies that even should be mentioned in the same breath and they're mostly a pain in the ass for Oracle and SAP because they've been chipping away at the low end of the market (very successfully). It is plausible that they'll continue to push upward and conquer increasingly larger markets, but that's something that will take a decade or two to unfold.
I mostly agree, but Google Apps for Business is slowly chipping away at some of the market that 5 years ago might've bought an enterprise "email solution", especially at the lower end of the market, like universities, state governments, and medium-sized businesses. Less success among very large businesses, but a few have adopted it.
Chipping away from the bottom takes time. But it will happen. Do you see the big enterprise software companies doing serious innovation in their products? The stuff that they built was often fairly cutting edge when they built it, but that was years ago, and those companies are sales driven not innovation driven, like Oracle. Of course they buy in newer more innovative technology, but then try to merge it with the legacy.
Enterprise software is a hell of a lot more than racks of web servers and managing licenses for Microsoft Office. Any publicly traded company, even one that is not a software company, has tons of business processes that are specific to its way of doing business and its industry. That requires various specialized if not custom software and lots and lots of glue to put it all together. On top of that, businesses want to see into all that activity so all the data from that software needs to be extracted, collected, combined, and reported on properly which requires technical and business expertise specific to that company's business practices and technology choices. The addition of more cloud services increases this burden while decreasing other burdens.
HP makes lots of money through EDS selling consulting services and outsourcing services to do all that stuff. Stuff that is being fed by the move to more and more cloud services whether internal or external.
And when I say enterprise services, I mean software as a service stuff like Salesforce. There are more services that business need than Salesforce such as data warehousing that HP is in a strong position to enter or dominate. That said, even though something like Salesforce is a turn key solution hosted off site, it doesn't mean there isn't an enterprise sales process. A middle manager doesn't buy up 1,000 seats of Salesforce subscriptions at $65 per month without going through the normal enterprise approval process. I've seen it and it can take several months even though your average small business owner can sign up in 10 minutes with a corporate credit card. The real deal involves contract scrutiny and due diligence work. And just because Salesforce is easier, it doesn't mean you don't need a ton of development and integration work to bring it in line with your existing practices and software tools which usually requires outside experts at least for training if not complete outsourcing.
Respectfully, I don't think you appreciate the scale of huge companies and the requirements for the software and suppliers that help to manage them.
If HP or IBM or SAP or Oracle wanted to do what, say, Dropbox does, they would throw effectively unlimited funding at the problem until it was solved. They might not even bother to market the result publicly, to avoid diluting their brand, but if they chose to do so, then the unfortunate small company concerned would probably be gone in a few months (assuming the large company didn't just litigate it out of existence because it was easier, if you're in a jurisdiction like the US).
Put another way, companies like Dropbox don't do well because they have a magic recipe that the big boys don't, they do well because they've chosen a niche where they're too small for the big boys to care about and where there are plenty of smaller businesses who will value and pay for that kind of offering because they don't have the same kind of resources in-house to do it themselves.
Edit... I should also mention Google, who aren't likely to be competing in the "enterprise" arena any time soon for a very different reason: they aren't set up to support that scale of customer. If you want to sell software to an engineering giant or a global services firm with an employee count in six figures, you don't show up with a few web pages and an e-mail address, you send a CxO or two on a plane to their head office to schmooze them, and then you appoint an SVP whose only role is to lead a large team of sales and support staff dedicated to jumping when that customer says jump.
>If HP or IBM or SAP or Oracle wanted to do what, say, Dropbox does, they would throw effectively unlimited funding at the >problem until it was solved.
And if there is one thing we've learned from Microsoft etc. is that throwing unlimited funding at a problem fixes it.
>And if there is one thing we've learned from Microsoft etc. is that throwing unlimited funding at a problem fixes it.
The main problem for Dropbox is simply scale. You, as a service provider, need to keep up with the storage and bandwidth requirements. The only way to deal with that is through buying more hardware/Cloud CPU time and bandwidth. If you're Dropbox, that means that you might need to get more funding. If you're IBM or HP, and they've made it a priority, it's much easier to get what you need.
Dropbox isn't really all that special from a technical perspective at this point. Any of the large tech firms can solve it easily, and Apple, Amazon and Google have all come out with services that do basically the same thing as Dropbox.
Your logic here seems to be that because throwing huge amounts of money at (say) search landed Microsoft in second place behind one of the most successful, lucrative, and well-capitalized technology companies of all time, money doesn't matter.
Second place after merging the service with the service in the second place (Yahoo search). Google wasn't the most successful, lucrative and well-capitalized technology when it started. Google was the case of one company completely dominating a market which they helped create. Dropbox is example of another such market (I am not comparing dropbox with google just giving an analogy).
Well, how much software have you paid for lately to help view your files and directories in a graphical tree, defragment your disks, compress the data on them, or scan that data for viruses? A few years ago, all of those things were available through a variety of commercial tools. Microsoft basically eliminated those entire industries when it provided a decent alternative built in to Windows.
In any case, your comment is a cheap shot. Microsoft have a relatively strong track record when it comes to establishing footholds in new markets, even if they've been slow to see the opportunity at first, by committing vast resources and running loss leaders for a while if necessary to establish their product. They also have some of the best R&D in the business, thanks in no small part to hiring some of the smartest people and putting them in top class facilities.
>Well, how much software have you paid for lately to help view your files and directories in a graphical tree, defragment your disks, compress the data on them, or scan that data for viruses?
As me how much Microsoft software I've used in last say an year. I know. Zero. Microsoft isn't a behemoth it used to be.
>In any case, your comment is a cheap shot. Microsoft have a relatively strong track record when it comes to establishing footholds in new markets, even if they've been slow to see the opportunity at first, by committing vast resources and running loss leaders for a while if necessary to establish their product
I wouldn't be so sure of a strong track. I think the only thing they have to show for themselves in last decade is Xbox. I can't think of any other new market where they have been as successful. I do understand where you are coming from, MS does have a reputation of going into new domains and becoming a NUMBER TWO player. But that's hardly what a company of the caliber of MS aspires to do. I do have respect for MS and its research facilities, but that doesn't mean I believe that it has what it takes to kill off start-ups with good momentum, like Dropbox. At best it can be the Bing to Google.
Internet Explorer market share: 40-50% (still by far the most popular browser)
> I think the only thing they have to show for themselves in last decade is Xbox. I can't think of any other new market where they have been as successful.
A few obvious examples:
Client division: Windows 7
Server and Tools division: Windows Server, Visual Studio, SQL Server, Exchange Server
Business division: Office
Entertainment and Devices division: XBox 360, various games, various mice/keyboards/etc.
R&D: Seems to employ/fund just about everyone doing industrial programming language research except for the 3 Google managed to hire, and a huge proportion of the industrial HCI research too.
MS obviously aren't dominant in all of these fields (compare Oracle for DB, the other major consoles for gaming, etc.). However, no start-up is going to compete with these sorts of products any time soon.
The most obvious targets for disruption by smaller players are the browser market, except that both Chrome and Firefox have basically written off business users as clients so MS will have a base there for as long as it wants one, and programming, except that with the resources and R&D Microsoft are throwing into that field lately it seems more likely that MS will pull away from the small time competition rather than losing ground for the foreseeable future.
That means at best, start-ups are going to be competing against Microsoft's secondary portfolio, things like BizTalk and Dynamics, and it's not as if there's a huge amount of innovation going on in the start-up sector in unsexy fields like that (unless you still think a business plan featuring the word "cloud" in big enough letters is worth VC funding, I suppose, but since the likes of Google Docs haven't even made a dent I don't suppose MS will be too worried about that sort of start-up for now).
>Microsoft Windows desktop market share: 90+%
A relic of last decade. A case of momentum.
>Internet Explorer market share: 40-50%
A side-effect of the above.
I hate to be sidetracked by my perceived opinion of Microsoft. I am not the one to spew hate on MS. I have a lot of respect for MS and its research philosophy.
However, the point I am trying to make is that Microsoft has never solved a problem by throwing money at it. When they have tried, they have ended up (inspite of having good products) in number 2 position.
Its worked well enough for them so far. MS Office killed Lotus 123 and Word Perfect. Internet Explorer killed Netscape. The XBox 360 is outselling the PS3. The only place where the "spend money until the problem goes away" strategy hasn't worked is in phones, and even there, the final chapter is hardly written.
They have no interest in doing what Dropbox does now. It is not a threat. But its a beginning. Dropbox is raising a lot of money to go after some aspect of the enterprise market. From niches will come the important profitable software of the future. Start with revenue from small businesses. SAP and Oracle are simply not innovating in that way.
> But its a beginning. Dropbox is raising a lot of money to go after some aspect of the enterprise market.
They really aren't. Revenues 2010 from various quickly Google'd sources and Wikipedia:
DropBox $100M
IBM $99.9B
Oracle $26.8B
SAP $17.9B
All of the big players there saw double-digit revenue growth relative to the previous year, too.
If you're about to reply with something about DropBox having a $5B valuation according to their next funding round, please consider that (a) AFAIK the round hasn't actually closed yet, and the markets have been pretty messed up recently so it's a lot less likely now than it might have been even a month ago, (b) GroupOn have been getting "valuations" well into 11 figures as well, which tells you how much this crazy maths is actually worth as a guide to future potential, and (c) DropBox are probably still small enough to be wiped out just by bad press and/or lawsuits over their reportedly dubious security and privacy policies, at least until any new round of funding goes through, and (d) in any case, a $5B valuation is a long, long way from having $5B in cash available to invest in attacking the enterprise market.
> From niches will come the important profitable software of the future.
I'm not sure what sort of niches you're imagining here. Pretty much every deployment of the heavyweight enterprise software is bespoke. That's why the developers tend to have teams dedicated to each major customer: they make a fortune on the consulting and customisation, on top of the cost of the software itself.
MySpace bought HP servers, but Facebook doesnt. That market will commoditise too, as cloud that uses software not hardware redundancy doesnt need the high margin features.
And the future of business software is gradually being built by Salesforce, Google, Dropbox and so on. The landscape will change drastically.
While there is innovation in clients, owning a platform is still part of a viable strategy. There is still an opening for a business friendly platform, as Microsoft can still lose and RIM is weak.