For those of us who spend our days focused on the bits and bytes of the enterprise WAN, it’s easy to lose sight of the upper layers of the OSI model. That said, software is not only redefining convergence across the enterprise network, it’s redefining entire industries.
Netscape co-founder and leading venture capitalist Marc Andreessen penned an essay in the Wall Street Journal late last year entitled “Why Software Is Eating the World.” His theory is that we are in the middle of a dramatic economic shift in which software companies are poised to take over large swathes of the economy.
Andreessen identifies the ubiquity of the mobile phone as the key driver of software. While PC sales are flat at best, more than five billion people are expected to own smartphones 10 years from now. If you are a software company, which platform do you think is more important to develop for?
One big driver of this is the cloud, which is making software hosting more economical. Andreessen states that the cost of a customer running a basic Internet application was approximately $150,000 a month in the year 2000. Today, one could host the same kind of app in Amazon's cloud for about $1,500 a month.
The largest video service is a software company: Netflix. The most influential music services are software companies: Apple's iTunes, Spotify and Pandora — with industry revenue from digital channels growing from two percent of sales in 2004 to 29 percent in 2011. Today's fastest growing entertainment companies are software companies: Zynga (the leading maker of Facebook games like Mafia Wars and FarmVille) and Rovio (maker of Angry Birds, which saw 6.5 million downloads on Christmas day alone). Because of such success, the videogame industry has doubled in revenue from five years ago.
Even traditional brick and mortar companies are better understood as software companies. Andreessen suggests that FedEx is best thought of as a software network that happens to have trucks, planes, and distribution hubs attached. Retailers like Wal-Mart, Target, Best Buy, and Walgreen's are also perhaps better understood by looking at them through a similar lens. No matter what industry you look at, software running on mobile devices is redefining our industries — and they must redefine the WAN as well.
