Merritt Group Blog

When Every Company’s a Tech Company - Understanding ‘Softwarization’

Question of the day: What does Reese’s have to do with technology?

Hint: Check out this commercial.

 

 

I’ll explain: While Reese’s may not seem relevant to anything beyond Halloween or stress snacking, it’s actually a perfect segue to talk about the mega-trend of “softwarization.” Because chocolate is to software as peanut butter is to … well … everything these days.

I can’t take credit for this comparison; I first heard it while listening to an awesome podcast featuring the holy trinity of Neil deGrasse Tyson, Bill Nye and Elon Musk. At one point in the show, they discuss whether Tesla or Google is better poised to make the first driverless car. As they point out, one's a car company and one's a software company … but you need both a car and software to make a driverless car happen.

"Hey! You got your car in my software!,” they say … a la the above commercial. “You got your software in my car!"

Of course, even labeling Google as a software company and Tesla as a car company is sticky at best -- which brings us to the idea of “softwarization.”

To a large extent, Tesla is just as much a software company as Google. Yet on the flip side, Google’s business encompasses far more than just software. Comedian Mitch Hedberg once pointed out that every book’s a children’s book if the kid can read; can a similar story really be told for every single company that uses software in some capacity?

This question and the concept of softwarization aren't new, of course; just consider Marc Andreesen’s Wall Street Journal article aptly titled “Why Software is Eating the World,” which nodded to the trend years ago. In 2011, Andreesen explained how and why more and more industries are being disrupted by software -- “ all of the technology required to transform industries through software finally works and can be widely delivered at global scale,” he wrote -- before laying out a laundry list of examples. A quick sample from his piece:

  • Today, the world's largest bookseller, Amazon, is a software company.

  • Today's largest video service by number of subscribers is a software company: Netflix.

  • Today's dominant music companies are software companies, too: Apple's iTunes, Spotify and Pandora.

  • Today's fastest growing entertainment companies are videogame makers—again, software—with the industry growing to $60 billion from $30 billion five years ago.

  • The best new movie production company in many decades, Pixar, was a software company.

  • Photography, of course, was eaten by software long ago.

  • Today's largest direct marketing platform is a software company—Google.

Lucy P. Marcus, CEO of Marcus Venture Consulting, recently wrote a piece for MarketWatch that expressed a similar idea -- namely, how disruptive technologies naturally blur the line between industries. Just consider Etsy, which burst onto the public markets last week (trading on the Nasdaq, I might add, despite its association with Brooklyn hipsters and artisanal crafts). Should analysts call Etsy a technology company or a retail company? Marcus asks this question in her piece, noting the mega-trend we’re talking about here: “But what sector does not rely on technology?” she writes. “How many companies that could be classified as technology companies could also be classified as something else?”

This question is interesting, both in regards to technology generally and software specifically -- but to a large degree, they also miss the point. As with most mega-trends, the real questions are with regards to impact: What does the trend of softwarization actually mean?

For starters, it means the technical world of software development is becoming increasingly mainstream, which offers an unprecedented opportunity for previously nerdy or niche innovations to be displayed and shared with the masses.

Andreesen also addresses the impact of softwarization in his post, taking a slightly different angle. He points to the demand for “education and skills required to participate in the great new companies coming out of the software revolution,” focusing on all the folks lacking the proper skills to ride the softwarization wave. Taking the supply/demand issue a step further, it’s clear that more people (especially marketers) at more companies are now required to have a strong understanding of the developer audience’s needs.

And to perhaps save the most obvious for last, another impact of softwarization is that the magic word of “differentiation” has become significantly more difficult. When every company’s a tech company and software’s in everyone’s peanut butter, it’s more important and more challenging than ever to remind the world what makes your software stand out.

Topics: technology