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Why Software Is Eating Marketing

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Marc Andreessen had a great essay in The Wall Street Journal yesterday, Why Software Is Eating the World. Remarking on the news from last week that Hewlett-Packard is looking to jettison its struggling PC business in favor of more heavily in software, he makes the case this isn’t a tech bubble — this is the new normal:

My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.

More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

There are two forces driving this, the first being near complete saturation on online connectivity. Andreessen expects that within the next 10 years, effectively everyone on the planet will own a smartphone, “giving everyone instant access to the full power of the Internet, every moment of every day.”

The second is the capability for entrepreneurs to develop applications for that audience with unprecedented ease:

On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries—without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month.Running that same application today in Amazon’s cloud costs about $1,500 a month.

With lower start-up costs and a vastly expanded market for online services, the result is a global economy that for the first time will be fully digitally wired—the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later.

He goes on to give a bevy of examples of software powering industry domination:

  • Amazon, the world’s largest bookstore, has software as its core capability
  • Netflix, an online service, as today’s largest video service by subscribers
  • Apple’s iTunes, Spotify, and Pandora as the world’s dominant music companies
  • Pixar, a software company, as the best new movie production company in many decades
  • online social game-maker Zynga as the fastest growing videogame company in the world
  • Wal-Mart using software to power logistics and distribution capabilities
  • Oil and gas companies using supercomputing and data visualization

Including, of course:

Today’s largest direct marketing platform is a software company. Now it’s been joined by Groupon, Living Social, Foursquare and others, which are using software to eat the retail marketing industry. Groupon generated over $700 million in revenue in 2010, after being in business for only two years.

How is your company doing in adapting to his new digitally-dominated landscape? How is your marketing department doing in leading the way?

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