Disruptions in the global software industry

Date:   Wednesday , June 13, 2007

The Information and Communication Technology (ICT) industry globally is in a very exciting period of change. Ever since the dotcom bust and rapid onset of globalization, the software industry has been on a new phase of growth, opportunity and disruption. Some of these (emerging) opportunities are driven by fundamentals of economics.

* Opportunity in the Middle and Bottom-of-the-pyramid markets (MOP & BOP): The new growth opportunity is now the MOP & BOP markets. These opportunities will enable hundreds of thousands of SMEs and billions of consumers in geographies from Brazil to Africa and India to the whole of Asia. This is an opportunity for hundreds of thousands of SMEs and billions of consumers in these regions.
* Business models are changing: Thus far the enterprise licensing or per-device model existed. However the cost of servicing these new markets require new business models such as SaaS, B2B/B2C/C2B community networks, computing as a utility, 24X7 software, services and support. That Salesforce.com has grown into a $500 million company by following the SaaS model is a case in point.
* Networks permeate everything: This is true everywhere. The value of closed (local) networks such as supply chain, BFSI, healthcare, manufacturing and engineering are permeating. These local networks are now being integrated with “Cloud” networks to enable discovery, value and collaboration. This is true even in the B2C space and look at what happened to Youtube and many others.
* Fundamentals bottom up: This is the most exciting prospect. Thus far it was the 80:20 principle, wherein the top 20 percent drove all opportunities. Now it is the remaining 80 percent that drive the market. For the millions of SMEs in engineering, retail, manufacturing, healthcare, education, et al, this represents a very large opportunity.
* Computing is becoming a utility: Look at the worldcommunity grid from IBM and the Sun Grid. Like electricity, computing is also moving towards being a utility. For better understanding, let me say that newer appliances make people consume more electricity and drive the demand-supply skew? Similarly, newer applications will drive computing as a utility. Applications for the education sector, SMEs, government, and consumer computing have great potential and will be at the forefront of driving the bottom up economics.

India represents the heart of these changes and everyone is clamoring to get a piece of the market. What does this mean for MNCs, global ICT entrepreneurs, professionals and others around the ecosystem?

Look around and you have prospective businesses staring you in the face. Simply put, it means new business models, software, technologies, ideas and networks, all working collaboratively with what exists today. Collaboration is the critical piece of the puzzle. We are in the middle of this huge tsunami with over 3 billion people in Asia and this is not an easy task.

This is a very exciting period as new companies emerging from Asia will create products and services impacting billions of consumers and registering high profits. So the business case for those of you who have entrepreneurial ideas is “to feed a hungry man teach him to fish”. Ask Muhammad Yunus of Grameen Bank who turned this thought into a profitable, sustainable and scalable business and won a Nobel while doing it.

Gerard Rego is the VP & GM India Product Development of MSC Software, the global leader in enterprise simulation and VPD software, Wharton Fellow 05, DV Fellow 06, Stanford University, and can be reached at innovation2030@yahoo.co.in