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But the market's increased depth certainly makes life easier for CIOs, who have more competing products to choose from in this maturing field, and who can negotiate better deals by buying a collection of products from one vendor. And CIOs can further benefit when these products are integrated in hopes of making them work together more easily.
Meanwhile, it may be more difficult for entrepreneurs to build large software companies, but that isn't dissuading entrepreneurs and venture capitalists from trying. The resulting firms may just be a bit more modest. "What is the category that could be the basis for a billion-dollar software company?" asks Google's Schmidt. Just about every function in a large company, such as finance, sales and manufacturing, has already been automated. For those core functions, along with products like databases and application servers, companies are standardizing on a handful of big suppliers.
"This becomes the basic platform, the transaction engine, for most companies," says Lane. On top of that platform, there will be many opportunities for small software companies to develop tools, niche applications and services that help CIOs develop semi-custom systems for their companies. These may not be billion-dollar opportunities, but they are big enough to build sustainable businesses. "There will be a few big players, with a lot of little players by their side," predicts Schmidt. As New Age proponents used to say in the 1960s: "Small is beautiful."
Eric Nee, a longtime observer of Silicon Valley, has served in a variety of editorial positions at Forbes, Fortune and Upside magazines. His next column will appear in September.
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