The Software Paradox

Chapter 6. Final Thoughts

“The measure of intelligence is the ability to change.”

— Albert Einstein

According to Bloomberg Businessweek, since the year 2000, an information technology company was counted among the world’s five largest businesses every year but two, 2007 and 2008. Microsoft was by far the most successful, serving as the industry’s representative on that list eight years out of the decade beginning in 2001. It hasn’t made the list since 2010, however, even as 2013’s list included both Apple and Google. This changing of the guard perfectly symbolizes the transition currently underway in the industry, one leading away from software as revenue and toward revenue using software.

It is a paradox that the economic value of software is falling even as its strategic value rises, and paradoxes are by definition challenging to accept. But look no further than Microsoft’s absence for confirmation of the risks. Even as the business continues to print money with its two most popular software franchises, it is retooling itself to compete in a very different landscape, and its new leadership reflects that.

Because the software industry has generated so much wealth historically, because it continues to today, and because software really is eating the world, it can be difficult to accept the idea that its intrinsic commercial value is in decline. But the evidence is both broad and conclusive. When large, successful incumbents are having difficulty growing license volume, margins, revenue, ...