Marc Andreesen penned the famous WSJ article “Why Software Is Eating The World” back in 2011, but it’s an important investment theme. Unless you’ve been living in a cave for a few years, this is nothing earth-shattering. You’ve seen how Amazon has become the largest bookseller, while Borders has gone the way of the dinosaur, Netflix has solidly displaced Blockbuster, and don’t even bring up what iTunes did to music retailers. When was the last time you stepped foot into a Tower Music store? Trust me, it’s been awhile, because they don’t exist anymore.
I’m interested in the investment opportunities within Andreesen’s quoted theme. Ideas like the consumerization of enterprise software. Everyone is so focused on consumer facing start-ups – Facebook, Twitter, and Zynga. I think there’s an underhyped opportunity in applying consumer product thinking to enterprise problems.
An earlier Techcrunch article on Peter Fenton talks about his belief that we sit at a significant inflection point for enterprise software companies; that we are seeing the consumerization of the enterprise. The cloud has lowered barriers to entry and is allowing smaller, more adaptive start-ups to compete with the stodgy, big boys. Enterprise software companies are re-focusing on usability, increasing user engagement and vastly improving the user experience; making something boring, like business intelligence, exciting.
At Techcrunch Disrupt, Jim Goetz of Sequioa said that Enterprise remains an “enormous opportunity” because companies are spending about $500 billion a year with legacy enterprise companies and those budgets are ripe for the plucking. in today’s hyper-competitive environment, companies must focus on their core competencies, in order to grow and scale quicker. They’re more open to outsourcing functions that will increase revenue and productivity, and decrease costs.
SaaS companies may not receive the media attention that consumer software companies receive, but their recurring revenue stream should be plenty attention grabbing for investors. Focus on where the money is, and not where the hype is.
My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.