Ann Winblad is not your average geek. Sure, she majored in mathematics and business administration in college. But then again, she was head cheerleader at her high school. And as it turns out, both pursuits serve her well in her current role as a partner in Hummer Winblad Venture Partners in San Francisco, the first venture fund to invest exclusively in software companies.
Throughout her professional career—which includes working as a programmer at the Federal Reserve and launching a successful accounting software firm—Winblad has seen her share of technology change.
“But it’s really nothing like the changes we’re seeing now,” she says, “when you combine things like service-oriented architecture, open source, grid architectures and edge computing, all at one time.” The outspoken venture capitalist spoke to Editor-in-Chief Ellen Pearlman about how these changes are shaking up the status quo.
CIO INSIGHT: What’s it like being a venture capitalist today?
Winblad: It’s really exciting to be a venture capitalist right now, because it’s like a tsunami of change hitting the incumbent software vendors. For the first time, I’m hearing large enterprises say they are going to abandon something. They’re not going to rip it out, but basically they’re going to let it drift away, because they are going to change their computing architecture. They finally figured out that their total cost of ownership is not just the up-front license, it’s the cost of long-term ownership—integrating, upgrading, moving to new platforms.
Are CIOs spending their IT budgets more wisely, or is there still room for improvement?
Well, I don’t think they get enough money to spend it unwisely. But a few things have happened: One is that software vendors know they cannot just go in there and sell innovation. They have to show there is ROI—in productivity, lowering costs of ownership, or improving revenue in a pretty short time period, probably within a year. Also, the pricing architecture is changing. The pay-as-you-go model, the subscription licensing model, has become very, very common for the core enterprise software, which means you also have more control over the vendor.
And last, but not least, companies are engaging earlier with the vendor. So products are being developed in collaboration, not customized, because nobody wants a customized product anymore. Customers are collaborating with each other, too, because they know a data-center-management product is not going to change their competitive advantage.
How have these changes affected the enterprise software vendors?
I think that over the next three to five years, life is going to be extremely challenging for the application businesses of Microsoft, SAP and Oracle. I don’t think that they can continue with the same products, the same pricing, the same architectures, or the same belief that once they’ve got that stuff installed, they’ll be able to continue to collect taxes from these customers.
The customer won’t pull it up and throw it away, but when they move to really composite business applications, all of a sudden the procurement application will be somewhere else, connected to the supply-chain application. All of a sudden they’ll say, “We’re going to virtualize four or five of these core business processes and use them on demand.”
And it’ll be pretty invisible, except that we’ll see less maintenance revenue over time. We see a lot of maintenance revenue now, and whenever I see maintenance revenue growing by leaps and bounds, and verticalization by the vendor (instead of by the customer)—I know that those vendors are moving from leader to laggard.
You were around, as I was, when there were companies like McCormack & Dodge, MSA and Policy Management Systems. They owned the application space in much the same way these vendors do today. They’re all gone. Every single one of them is gone. And they were the stars of the early 1980s.
Do you think we’re seeing that again?
Gradually. I think the incumbents want us to believe that they have this kind of control, and that is true if you’re dealing with MIS people. But today you’re dealing with information strategists. And they like innovation, but not just for the sake of innovation. We have lots of opportunity to make software better, and as long as that opportunity exists, it’s always challenging to remain the incumbent.
