Innovation in Enterprise Software

There’s been a resurgence of comments/questions about the state of innovation and/or growth in the enterprise software industry, correlated somewhat with the wave of year-in-review posts.

Bill Burnham looks at the public markets and sees a shrinking number of companies, a shrinking market capitalization of the sector. This has received numerous reinforcing links/comments.

Here’s another commentary by Goldman Sachs that leads with the “maturing” software industry.

The industry’s only full-time curmudgeon has been telling us IT doesn’t matter for some time now (which means you can save $18 and skip his book which poses the same question).

Oft quoted pundits like Erik Keller and Vinnie Mirchandi are apparently podcasting about same.

Perhaps it’s time to throw in the towel? I’m working in the software industry by choice so obviously I don’t think so.

There’s a very simple model of high tech industry evolution that I saw at MIT. I’m forgetting the name of the specific professor who first drew it up but anyone who knows please tell me and I’ll update the attribution. The model looked something like this:


Pretty basic right? But it’s very accurate and no one seems to make this distinction in terms of WHERE innovation is occurring.

What did we see from 1995 – 2002? A proliferation of new applications (E-procurement, Portals, PLM, SCM and others). What are we seeing from 2002 – present? An incredible amount of innovation in infrastructure including: server virtualization, storage virtualization, application management, BPM, enterprise services bus, RFID, web services management and many more.

As best as I can tell this model holds pretty well going back to the 70's. We've had waves of mainframe & minicomputer applications followed by some of the first discrete infrastructure markets like databases. Follow this up in the late 1980’s with a wave of databased oriented client-server applications and following this, a growth in EAI and OLTP vendors.

How people are not impressed/excited by the current innovation at the infrastructure layer is beyond me. Compared to the previous era(s) of EAI and systems management we've made tremendous strides. For whatever reason, people seem to discount this innovation at the infrastructure layer and run with their stories/commentary about a shrinking or compacting or maturing or less-than-innovative enterprise software industry. So be it.

But what exciting state we’ll be left with when this most recent infrastructure cycle runs its course. When most companies have a sizeable stock of enterprise class services up and running in production quality with a good service layer runtime, everything about today’s enterprise software market is going to change. I think customers are going to be thrilled with the results.

If the timing of the previous cycle is any guide, we’ve got a few more years of this infrastructure era left to go. Apparently this is unsatisfactory to the pundits and industry press. I want Christmas to come early too, but like the menu says: “Good cooking takes time. If you are made to wait, it is to serve you better and to please you.”