“Strategic Inflection Points” – PC Revolution and Cloud Computing

I am reading Only the Paranoid Survive by Andy Grove, the legendary CEO of Intel.  In the book, Grove focuses on dramatic changes to the economics of an industry, which he calls “strategic inflection points.”    One “inflection point” he discusses is the disruption the PC brought to the computing industry.

For decades, up until the 1980s, organizations like IBM, DEC, HP and WANG were vertically integrated companies. These major technology players had their own proprietary semi-conductors, computers, software and sales forces (distribution). There was fierce competition for customers because once a system – or “integrated stack” – was sold the purchaser was, for all intents and purposes, ‘locked in.’  The Personal Computer Revolution changed all that. A PC could have an Intel Chip, 3^rd party graphics cards, a 3^rd party accounting package and the user could buy it from a 3^rd party reseller.   As a result, “integrated computing” collapsed.

What remained were groups of compatible software applications and operating systems.  Compatibility was complicated by on-premise computing. Each application could have multiple versions and if you had multiple applications you ended up with a complex matrix of compatible or incompatible systems.  Software companies aligned with one ecosystem of software applications that revolved around a “software stack” of, for example, Oracle, SAP or Microsoft.    This is all changing once again. We are entering another “strategic inflection point” – Cloud Computing.

Cloud computing in the application space is referred to as SaaS (software as a service) and operates on a web-based single version.  In other words, the challenge of negotiating a matrix of version compatibility is removed. This platform allows for direct distribution, low cost maintenance and a flurry of niche hosted applications that talk to each other – which means less dependence on “software stacks” and more choice for licensors.

Just as the PC broke the fully integrated computing companies of the 1970s,  SaaS, another “strategic inflection point,” further pluralizes the software industry.

Related posts:

1. Managing Risk in the Cloud
2. Cloud Computing: More Knowledge and Greater Productivity for Less Money
3. North Carolina Lawyers can use Cloud Computing Services in their Law Practices
4. What is SaaS?: Understanding the Concepts of Cloud Computing
5. Cloud Computing for Lawyers: An Introduction