A couple of weeks ago, Marc Andreessen wrote in The Wall Street Journal a provocative piece called “Why Software is Eating the World.”
Among the observations he makes are:
My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.
More and more major businesses and industries are being run on software and delivered as online services–from movies to agriculture to national defense.
Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.
On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries–without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.
From there, Marc rehearses which industries have “become” software:
- Amazon, in book sales and so very much more: it excels, simply enough (although it’s anything but simple) at making it “easy to buy anything”
- The largest video service is also a software company: Netflix.
- Music? iTunes, Spotify, and Pandora.
- Entertainment? Videogame makers (annual revenue from videogames far surpasses that of the motion picture box office)
Not only are these industries software, but of course software is becoming a greater and greater share of what we pay for when we buy physical goods. Cars depend on software for everything from engine timing and stability control systems to self-diagnostics and passenger protection systems. Commercial aircraft are so famously dependent on automatic control systems that some are beginning to question whether pilots’ actual flying skills are atrophying.
Even Wal-Mart and FedEx are what they are thanks to software.
So what does this have to do with Law Land?
Try this thought experiment: What industry do you think will remain immune from the impact of software?
More pointedly, what industry will remain immune from new or existing competitors inventing ways (with software) to do things far more effectively and efficiently or–and this is the big one–to do things that simply can’t be done today at all?
If you nominated Law, I have news for you. Too late. It’s already happening, and it will only accelerate.
It’s being driven equally by clients demanding that we become more efficient, and by firms who want to make sure they stay on the right side of history.
If your firm is on the “other” side of history, remind me again what your plan is.