Marc Andreessen in the WSJ is hard to excerpt. It’s a good article and here is my summary:
- Technology companies are in the headlines again.
- They aren’t getting awesome valuations in the stock market
- Every major industry in the world is being transformed by software
- Therefore the software companies should win
I agree with his sentiment and I agree that his investment strategy is probably the only way of trying to make money on this trend, but I see a non sequitur in #4 above.
The problem is that existing companies are pretty bad at software, particularly compared to the young, high-energy Valley startups. The Amazon/Borders story that Andreeseen references will probably prove the exception. It’s a path of much less resistance for incumbent companies to just pick up some Valley Best Practices and change their cultures a bit over time than the other way around.
Certainly some will acquire their software-only valley doppelganger (if, say, Borders had bought Amazon in 2002) to try to change their culture. Over Andreessen`s macro time-horizon, this is probably the best he can hope for. But a software company just makes software and there aren’t many industries that can actually support SaaS players: not enough scale.
The pardigm will be for companies to keep doing what they do, but with more and more software.
The winners will have top-notch proprietary, internally developed and maintained software wrapped in a traditional business model.
Not Unreasonable 