The Continuing Transformation of the Tech Industry

Assumed Axioms:

  1. Technology has impacted the world in 3 waves (List of companies by founding year)
    1. Hardware – Building the infrastructure
    2. Software – Easily scalable businesses e.g. social media
    3. Hybrid – Combining real-life and assuming always available internet.
  2. Software is eating the world (source) – “More and more major businesses and industries are being run on software and delivered as online services”
  3. Startups and tech in general can be thought as an expanding fractal, reaching all areas of our lives (fractal idea).
  4. The rise of open source can be explained as eating it’s way up the stack as each layer becomes commoditized.

The Past: 1980-1995 – The Transformation of the computer Industry

source: Andrew S Grove – Only the Paranoid Survive

The industry:

  • Had been vertially aligned. i.e. A handful of suppliers, delivered the full end to end package to allow using the hardware and software.
  • A significant change was the standardization of the IBM PC
  • This and other changes allowed shifting to a horizontal marketplace, allowing companies to specialize within each layer and to save costs and earn more profits.
    Microsoft/Intel probably being the biggest winners.

The Present

Any company essentially bundles a bunch of processes/people that allows solving problems within one encapsulated entity, I’ve blogged before about banks as a stack:

The Future

  1. What are the stacks of services that currently deliver value end to end?
  2. Is that market vertical or horizontal?
  3. What model is likely to win under which scenario? You may even see a mix.
    e.g. Apple has vertical integration of iphones, with some horizontal experimentation allowed within the app store, which they then take-over.
  4. You may even find that what wins in the early-stages becomes replaced later.
    e.g. Tableau was excellent software and got deployed at 1000s of companies
    However once it proves the model, the more successful it becomes the easier it may be to replace with an open source alternative.

Prediction: Open Source Eats it’s way up the Pyramid

Stack of oranges in pyramid shape against grey background - CSF015212 -  Dieter Heinemann/Westend61

If you consider most companies as a stack, that software is expanding everywhere and that once it’s used by a significant number of users that an open source version becomes more likely. I think we will see open source companies appear at the bottom of the stack and continue to the top.

Question: What would stop it winning a layer?

Thoughts:

  • A small developer user base. If most users are not programmers, no one will write it.
  • A small user base. Without a wide base to support it, only 1% of users may pay or contribute for open source so it won’t be supportable. In fact if a piece of poor software is introduced it could result in a failed market. i.e. the open product is bad but good enough such that a “better” commercial alternative isn’t viable.

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