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Why SW is eating the world

Why SW is eating the world. Marc Andreessen, 2011 VC that invested in Facebook , Groupon , Zinga , Twitter, Skype, Foursquare, LinkedIn. His View. Internet, SW companies are building real, high growth, high margin, highly defensible businesses

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Why SW is eating the world

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  1. Why SW is eating the world Marc Andreessen, 2011 VC that invested in Facebook, Groupon, Zinga, Twitter, Skype, Foursquare, LinkedIn

  2. His View • Internet, SW companies are building real, high growth, high margin, highly defensible businesses • We are in the middle of a dramatic and broad technological and economic shift in which SW companies are poised to take over large swathes of the economy

  3. Trends in biz practices • Major businesses and industries are being run on SW and delivered as online services • Many of winners are Silicon Valley-style entrepreneurial technology companies that invade or overturn legacy industry structures

  4. Why is this happening now? • Computer and Internet technologies have advanced across some threshold • Over 2B people use the broadband Internet • On back-end, SW tools and Internet-based services make it easy to launch a new global SW-powered startups with low start-up cost

  5. Example 1: Book • Fall of Borders • Decline of Barnes and Noble • Rise of Amazon • The world’s largest bookseller • 2001, Borders handed over its online biz to Amazon • Amazon virtually sells everything online • Even books themselves are SW

  6. Example 2: Video • Fall of Blockbuster • Rise of Netflix, Hulu • And more: Amazon Video and iTunes • Other media companies are increasingly more online-service oriented

  7. Example 3: Music • iTunes, Spotify, Pandora • 2% in 2004 to 29% in 2010 • Traditional record companies play a diminishing role as a content provider • They provide content to the above companies

  8. Example 4: Videogame • Fastest growing company is Zynga • Rovio, maker of Angry Birds • Traditional game companies like EA and Nintendo have been stagnating

  9. Example 5: Movie production • Pixar, one of the best movie production companies, is a SW company. • Disney has to buy Pixar

  10. Example 6: photo • Photos in cameras and phones are uploaded to the Internet for archiving and sharing • Shutterfly, Snapfish, Flickr,… • Kodak had been happy with film cameras, and now…

  11. Example 7: marketing • Google • Groupon, Living Social, Foursquare • They use SW to eat the retail marketing companies

  12. Example 8: telecom • Skype: the fastest growing company • CenturyLink (3rd telecom company) has declined fast • AT&T and Verizon have survived by transforming into SW companies, partnering with Apple and smartphone makers

  13. Example 9: recruiting • LinkedIn is the fastest growing company • Employees edit their resumes, which are directly searched by recruiters

  14. Example 10: autos • SW is eating much of the value chain in car industries • SW runs engine, controls safety functions, entertains passengers, guides drivers, … • Hybrid, electric cars will accelerate the shift • Driverless cars?

  15. Example 11: logistics • Wal-mart uses SW to power its logistics and distribution capabilities • FedEx is thought of having the best SW network to which trucks, planes and hubs are attached • Success or failure of airplane companies hinges on SW • Ticket pricing, route optimization,…

  16. Example 12: natural resources • Oil and gas companies use supercomputing for visualization and analysis in exploration efforts • Agriculture is powered by SW; satellite analysis of soils for seed selection

  17. Example 13: finance • Every financial transaction is done in SW • Financial SW companies allows anyone to accept credit card payments with a mobile phone • PayPal allows payments and transfers online

  18. Example 14: defense • National defense is increasingly SW-based • A modern combat soldier is embedded with a web of SW for communications, logistics, and weapons • SW-powered drones launch attacks • Data mining to detect terrorist attacks

  19. What next? • Healthcare & Education • They have been resistant to entrepreneurial change • But fundamental SW-based transformation is coming

  20. Also,… • Companies in every industry need to assume that a SW revolution is coming • Even SW-based companies as well • Oracle and MS are threatened by new SW offerings like Salesforce.com and Android • The battle between incumbent companies and SW-powered insurgents will be epic

  21. Challenges (1/3) • Every new company is being built in the face of massive economic headwinds • A successful company will be strong and resilient and will grow even faster when economy becomes stable

  22. Challenges (2/3) • Many people lack the education and skills to join new SW-powered companies • Every company is starved for people with talent • Qualified SW engineers, managers, marketers, salespeople will be invaluable • While national unemployment will soar • The more SW penetrates the industry, the less employees will be required

  23. Challenges (3/3) • The new companies need to prove their worth • Build strong cultures, delight customers, establish competitive advantages • Justify their rising evaluations

  24. Conclusions • Building a SW-powered company is easy • Making it successful is difficult • Every industry will be transformed by SW • That is the big opportunity

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