Eric Kidd, The Missing Future: But this dream is nearly gone. It’s getting crushed between the awful power of Microsoft, and the onrushing juggernaut of open source. A 30-person company can’t compete with Microsoft. And a 30-person company will have a hard time competing with 300 open source contributors giving software away for free and making their living as in-house developers (though it can be done).
Robert Scoble: Let’s go back 10 years, OK? Remember Baskin Robbins? 10 years ago they owned a near monopoly on ice-cream outlets. At least they did in Silicon Valley. Yeah, they had a few competitors here and there, but they had the majority of the market. I bet if you had told Baskin Robbin’s executives 10 years ago “there’s gonna be a new chain that’s gonna come along that’s gonna obliterate your market and change the rules” that their execs would have laughed in your face. I bet that Baskin Robbins had lots of Eric Kidds back then who said “I sure wish I could make a mint selling ice cream like Baskin Robbins, but these guys have the world all wrapped up.” Enter Cold Stone Creamery. […] How did they do it? Eric Kidd, please pay attention. They came up with a new concept.
Joshua Allen: As “platform” components mature, they become less interesting and there is more pressure to standardize. Things like C#/CLI going to ECMA, SOAP to W3C, all point to the fact that the industry has largely acknowledged this trend. This, in my opinion, is the biggest flaw with the arguments that say there is no opportunity in software today. If selling operating systems and developer platforms was the only way to make money, the critics would be right. But concentrating exclusively on operating systems and developer platforms is rather unimaginative, IMO, and not likely to bring great investment returns for anyone these days. Sure, they are strategic, but not something the typical end-user is begging for right now. There are plenty of other things that people are asking for, and lots of things that could be done to bring value to normal computer users. That’s going to be the case for the forseeable future, and as long as it’s true there is opportunity in software.
From my point of view, this entire debate is an instance of this problem:
If you’re in the technology business, you can either try to stay ahead of the commoditization curve, or you can embrace the inevitable commoditizing effect and try to build your business around it. In the end, the former is a difficult proposition. EMC made a fortune selling proprietary hardware in a commoditized hardware business, but now it’s under attack from below by Network Appliance, and NetApp will soon be under attack from below by vendors selling commodity NAS devices based on industry standard PC hardware, Linux, and Windows. Meanwhile, Dell has thrived, not by fighting commoditization, but by embracing it.
If you’ve come up with a new concept, you are by definition ahead of the commoditization curve. So, let’s say you have a new concept, and you want to build a company around it. Can you grow to 30 people? Sure, if the concept is a good one. There are thousands of 30-person companies for every Microsoft and successful open source project that might compete with you. When the market is small, the Microsofts and open source projects of the world are not likely to notice, unless you’re unlucky.
The question isn’t whether a small ISV can compete with Microsoft or open source. The question is, can a small ISV become a large ISV? In other words, how do you grow from 30 people to 300 people to 3,000 people? The answer is, you can’t do this without getting noticed, and that means you’ll be competing against Microsoft and open source. So, if you’re happy being a 30-person company, you should be just fine–that is, if you have a good enough concept. If you want to be the next Microsoft, though, that’s a whole ‘nother ball of wax.
If anything, Scoble’s example of Baskin Robbins vs. Cold Stone Creamery strengthens the argument here. Baskin Robbins is owned by the conglomerate Allied Domecq, a company that “builds powerful, global brands” including not just Baskin Robbins, but also Beefeater (gin), Kahlua (liqueur), and Dunkin’ Donuts. Allied Domecq did around $5 billion in sales last year. Meanwhile, according to Hoover’s, Cold Stone Creamery did around $5 million in sales last year. That’s right, $5 million. Give me the choice between Baskin Robbins and Cold Stone Creamery, and I’ll pick Cold Stone Creamery any day, but that doesn’t make it a better business. It’s all about scalability.