by Alex Brown, CEO, 10th Magnitude
Microsoft CEO Satya Nadella once said: “It’s a software-powered world.” I couldn’t agree more. But six years ago when 10th Magnitude was just starting, I would have agreed with Satya for completely different reasons than I do now. Since that time, software-powered companies have evolved the entire corporate revenue landscape. Only the averse-to-change companies—acting like ostriches with their heads underground—are missing this massive economic shift.
Back in 2010, our premise was that cloud was going to change the world because it would allow us to build cool custom software for companies that couldn’t have afforded it before: we would economically build and operate low-risk custom SaaS applications in the cloud. That was a software-powered world, 2010 style.
We thought the model of building and operating software in the cloud would just spread to larger and larger companies. But actually the big enterprise customers are now building more and more of their own software. In the current market it’s much cheaper for those customers to invest in in-house developers. Our job is to help them use the cloud to make their development and operations (and I’ll get to DevOps in a minute) faster, more agile, more cost efficient, more impactful and more dynamic.
So here’s where it gets interesting. Companies of all sizes are realizing that they have a core application or applications that are unique to their business success. It’s not accounting or HR or email software that other people have already made much better than they ever could. They just buy that stuff. It’s the critical application that does something specific for their company like routing trucks most efficiently or connecting meters to predict outages or training sales people; and they can sell it. It’s their cloud economy competitive advantage. That is a software-powered world, 2016.
The way I see it, companies fall into four categories:
1. The Classic
These companies have always been in the business of selling software. (The industry term Independent Software Vendor (ISV) seems pretty old school now since I think every company can—and probably should—somehow monetize their software.) The cloud allows Classic companies to produce, deploy and sell their products better, faster and more cost effectively; and DevOps further streamlines those processes.
2. The Found
These companies didn’t start out selling software. They had some other core business, but along the way they realized that software they created to help run their own business was a revenue stream. Now software complements or eclipses their original core business.
3. The Enabled
These non-software companies use specialized software to manage a specific aspect of their core business. These companies can use cloud to build and operate central business software that needs to be scaled to accelerate the core business. This software may or may not be sold outside the company, but providing it across internal and customer audiences increases the overall company growth.
4. The Ostrich
These companies just don’t get it. They have their head in the ground when it comes to cloud adoption and the value inherent in their software. My prediction is that these folks will be outcompeted, and soon.
We are now helping companies in categories 1-3 expand and capitalize on their software competitive advantage. We are creating opportunities for our customers to use their intellectual property, their unique ideas and their tools to monetize their data and software.
For example, we helped an old-school industrial vehicle manufacturer who saw an interesting opportunity to help their customers comply with their local environmental regulations more efficiently. We built them cloud-based software that gathered, analyzed and disseminated data generated by Internet of Things devices in their vehicles and they are selling it to customers on a subscription basis. So if you were in the market for one of these industrial vehicles, wouldn’t you buy the one with the app that makes operating it more efficient? Of course. And the manufacturer is reaping the benefits of that competitive advantage and a completely new revenue stream based on an expandable, scalable, flexible IoT platform. They’re even thinking ahead to additional value added services such as proactive maintenance, driver safety and route optimization. Core business, watch out—here comes software.
Needless to say, the cloud (Satya would say Microsoft Azure, of course) makes this all possible. Ostriches, take cover.