Launching the Software Strategy Blog

This blog will explore the following hypothesis:

As the software industry matures, software companies will have to employ more "old economy" strategies and fewer "new economy" strategies in order to compete successfully.

Let me explain how I am using several of these terms today. Please bear in mind that one of this blog's goals will be to clarify these definitions!

• Software industry: At least initially, I would like to concentrate on companies whose primary business is developing and selling software. This would include such names as Adobe, Autodesk, Intuit, Microsoft, Oracle, SAP and Symantec. This definition excludes a number of well-known companies which are renowned for their software development capabilities, but who make their money elsewhere. For example, this definition excludes Google (most of whose revenue is from advertising), D. E. Shaw (most of whose profits are from trading using proprietary software), EDS (most of whose revenues are from services), or indeed most of the "Web 2.0" companies. It remains to be seen whether this is a meaningful distinction.



• "Old economy" strategies: Here, I refer to the business strategies that companies in the manufacturing and service sectors have used to compete successfully over the past four decades. These would include such concepts and disciplines as economies of scale, barriers to entry, process re-engineering, six-sigma quality, etc. These strategies are the bread-and-butter of most traditional strategy consulting firms and most business school curriculums. You tend to read about these sorts of strategies in the Harvard Business Review.



• "New economy" strategies: Here, I refer to the business strategies that have helped many of the relative newcomers in the technology industry succeed. These strategies would include such concepts as first-to-market, innovation, knowledge management, multifunctional teams, etc. You tend (tended) to read about these sorts of strategies in Business 2.0 and Red Herring long before the "old economy" press heard about them.



• Compete successfully: A slightly briefer way to say "create and retain sustainable competitive advantage" (using the language of Michael Porter's Competitive Strategy canon) or a slightly more verbose way to say "win" (using the language of the Boston Consulting Group's book Hardball).

Of course, for a long time software companies have successfully employed "old economy" strategies (Microsoft comes to mind), and "new economy" concepts such as product innovation will always be an important aspect of any successful software company's strategy. But I suspect that the relative importance of these two kinds of strategies will continue to shift.

I hope to learn and share some useful insights while writing this blog. Who knows where this may lead, but perhaps there will be something useful learned which may have applications for strategic planning and/or investment decisions.

I expect to draw upon a range of sources in addition to conducting some original analysis; these sources could include published studies and articles on the industry, news coverage of current events in the industry, books and publications which more broadly consider competitive strategy topics, SEC filings, and equity analyst reports.