Enterprise Software Market – Take 2

I didn’t do a good job last week explaining the relationship between Nash starting Integry and Oracle being in trouble. For one Oracle is a placeholder. You can insert any enterprise company that’s selling software as packaged good. Microsoft is another example. Despite their recent resurgence, of which I am a fan of, there is no reason for me to use any of their products if I have to start an Internet business tomorrow. And that’s the point I was trying to make apart from the messed up selling process itself. Hence the conclusion was in the final paragraph.

Consider this, anyone starting a new business today has no reason to buy an Oracle solution. They are expensive, hectic, and for the most part, don’t work. Their customers are big traditional corporates who just like them—reaping the fruits of previous century’s tech. I am afraid that’s not going to last long.

There is no reason for Integry to purchase any of the Oracle products, cloud or not. Even if they have all the money in the world. This was unprecedented before the Internet. And the Internet, when it was happening, for both Oracle and Microsoft was at best an oversight. Do they regret and want to change how they approached it? For sure. Will they be successful? I am not so confident. There is a new Microsoft/Oracle of the Internet age i.e. Amazon. Or if I have to be more specific, Amazon AWS.

AWS is the lingua franca of Internet businesses. But that’s not the point. Being on the Internet means no distribution costs. And a lot of convenience and choice. Need to take payments, head over Stripe. Want to collaborate with your team, there is Slack. The number of employees growing and need to have unified Identity Management, you got Okta. Growing in the number of projects, you got Trello and Basecamp. So on and forth. Why would you ever want to go through the tedious process and complicated licensing fees? And, since Integry will also reside on the Internet, it will eliminate one more reason i.e. integrating all these heterogeneous applications with each other to buy from Oracle/Microsoft. And the cycle will repeat itself.

There is another useful way to understand the whole point. From Stratechery (bolds are mine):

This is why I believe it is critical to draw a clear line between the IT era and the Internet era: the IT era saw the formation of many still formidable technology companies (Microsoft, Oracle, SAP etc), but their success was based on entrenching deep-pocketed incumbent enterprises (P&G, Telecom Sector etc) who could use technology to increase the productivity of their workers. What makes the Internet era a much bigger deal is that it challenges the very foundations of those enterprises.

… the critical difference between the IT-era and the Internet revolution: the first made existing companies more efficient, the second, primarily by making distribution free, destroyed those same companies’ business models.

In the last sentence, Ben Thompson is referring traditional incumbents like P&G, Unilever etc and not necessarily Oracle or Microsoft. But the distinction does not matter because latter’s business model is dependent on the former’s well being. Also, this destruction will be slow and sudden. You wouldn’t know there is something wrong and suddenly one day you will. But that will be too late.

Just to be clear, both Oracle and Microsoft are probably set for next decade or so. There is no immediate threat. Microsoft is better positioned in the sense that they have finally gotten hold of the problem. But it’s still not resolved as yet. Most of the money is still coming from Windows and Office and not so much from Office 365, mobile apps, Azure etc. One last point, Apple is also from the same IT era. But Apple isn’t a software company the way Oracle or Microsoft is. They have an orthogonal business model. They make really good software but the software is in service to unmatched hardware and user experience. Not something to be sold separately for profit. Also, being a supposed loser in PC era enabled them leverage Internet, via iPhone mainly, way better than Microsoft or Oracle.