Stephen O’Grady > Quotes

“The solution to problems of adoption is not a better product, but a focus on barriers to adoption.”
― Stephen O'Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“Where technology acquisition was once the province of the CIO, today it’s the practitioner leading that process, because by the time a CIO typically hears about a project today, a majority of the technology and architectural decisions have already been made.”
― Stephen O'Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“The most dangerous belief for any software company today is that the solution to their adoption problem lies in better software engineering.”
― Stephen O'Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“The measure of intelligence is the ability to change.” — Albert Einstein”
― Stephen O'Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“In such a climate, the more appropriate way to think of software is as an organizational asset: nothing more and nothing less. Looking at software without assuming monetization can allow more strategic opportunities to emerge.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“As Dixon said when he coined the term: Prominent examples of this “full stack” approach include Tesla, Warby Parker, Uber, Harry’s, Nest, Buzzfeed, and Netflix. Most of these companies had “partial stack” antecedents that either failed or ended up being relatively small businesses. — Chris Dixon”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“Whether the lens used is market conditions, or the performance of bellwether software entities, or even individual products, the trend is the same: it is growing more difficult to sell software up front, on a standalone basis. More important, however, the market appears to be pricing this into its valuations, favoring models that make money with software over those attempting to make money from the sales of software.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“full stack startups are those whose focus extends to each layer necessary to deliver the desired user experience.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“From a pure development model perspective, larger technology vendors have long outsourced research and development to startups, believing that the cost of the acquisition premium is more than offset by lowered risk and costs with better product predictability.”
― Stephen O'Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“There are many potential explanations for the less-than-robust performance, but IBM’s current strategy suggests that one component at least is a challenge to the traditional shrink-wrapped software business. As much as any software provider in the industry, IBM’s software business was optimized and built for a traditional enterprise procurement model. This typically involves lengthy evaluations of software, commonly referred to as “bake-offs,” followed by the delivery of a software asset, which is then installed and integrated by some combination of buyer employees, IBM services staff, or third-party consultants. This model, as discussed previously, has increasingly come under assault from open source software, software offered as a pure service or hosted and managed on public cloud infrastructure, or some combination of the two. Following the multi-billion dollar purchase of Softlayer, acquired to beef up IBM’s cloud portfolio, IBM continued to invest heavily in two major cloud-related software projects: OpenStack and Cloud Foundry. The latter, which is what is commonly referred to as a Platform-as-a-Service (PaaS) offering, may give us both an idea of how IBM’s software group is responding to disruption within the traditional software sales cycle and their level of commitment to it. Specifically, IBM’s implementation of Cloud Foundry, a product called Bluemix, makes a growing portion of IBM’s software portfolio available as a consumable service. Rather than negotiate and purchase software on a standalone basis, then, IBM customers are increasingly able to consume the products in a hosted fashion.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“Open core/hybrid source Probably the most common model today, open core describes an open source project that is partially, even mostly, open source, but with some portion of the project or some features remaining proprietary. Typically there is a basic level of functionality — referred to as the core — which remains open, and proprietary features or capabilities are added upon and around this. The highest profile example of this model today is Hadoop. Cloudera, the first organization to commercialize the data processing platform, contributes along with other organizations, commercial and otherwise, to the base Hadoop project, which is open source. A proprietary product that includes management functionality is then sold to customers on top of the base open project. This model is viable, but can be difficult to sustain. One of the challenges for those adhering to the open core model is that the functionality of the underlying open source project is evolving at all times, which means that the proprietary extensions or features must outpace the development of the open source project to remain attractive to customers.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“In an industry where usage is a function of purchase rather than a real desire for the item, technology providers will obviously optimize for the purchasing process. But in reality, that is no longer true today, and hasn’t been true for years. As with IM or the iPhone, technology is increasingly being driven by bottom-up, rather than top-down, adoption. The world has changed, but only a select few in the technology industry have realized it. As William Gibson might put it, the future is already here, it’s just unevenly distributed.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“The ascendance of open source is not altruistic; it’s simply good business for contributors and consumers alike. But the reason it’s good business is that it makes developers happier, more productive, and more efficient.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“This is the Software Paradox: the most powerful disruptor we have ever seen and the creator of multibillion-dollar net new markets is being commercially devalued, daily.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“outsourced research and development to startups, believing that the cost of the acquisition premium is more than offset by lowered risk and costs with better product predictability.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“Developers are the most-important, most-valuable constituency in business today, regardless of industry. Technologists newly empowered with tools, hyper-connected via specialized collaboration and communication networks, and increasingly aware of their own value are no longer content to be mere stage players. They’re taking an active hand at direction. That genie is out of the bottle, and will not be returned to it. Businesses will never have the same control over developer populations that they once did, even if the supply of developers eventually comes closer to matching the demand. Now that developers have finally been handed the tools to control their own destiny, they are taking full advantage and making their influence known, both through the technologies they use and the ones that they ignore.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“So if open source is cannibalizing the commercial software markets, it’s all smooth sailing for those who commercialize open source, right? Well, not exactly. In order to monetize an otherwise free and open source software product, vendors have been forced to develop creative new business models to get buyers to pay for what they can otherwise get for free. The most common of these are described below. Support/service The most common model of commercial open source is support and service. Instead of paying for the product, buyers pay vendors to support a product they can otherwise obtain at no cost. The advantage of this model is that most large organizations require commercial support for production applications, so sales is less of a challenge. The disadvantage of this services-only approach is that the deal size is commensurately lower than with traditional commercial software that includes both a license component and support and service.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“While it was possible, then, for Apple to make up ground in software very quickly, doing so in the world of data was substantially more challenging even for a company of its resources. There are no shortcuts, as data simply cannot be generated overnight. There are only two means of producing it: collecting it over time, or acquiring an entity who has done so. Unlike software, then, which is a thin shield against would-be market entrants, organizations that amass a large body of data from which to extract value for themselves or their customers are well protected against even the largest market incumbents. Every software organization today should be aggregating data, because customers are demanding it. Consider, for example, online media services such as Netflix or Pandora. Their ability to improve their recommendations to customers for movies or music depends in turn on the data they’ve collected from other customers. This data, over time, becomes far more difficult to compete with than mere software. Which likely explains why Netflix is willing to open source the majority of its software portfolio but guards the API access to its user data closely.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“describes as a “full stack startup.” Nest could certainly have pursued a less ambitious and lower risk strategy of developing its learning software and user interface, then license it to organizations with greater logistical and manufacturing capabilities but less competence within software. The problem with this approach is that, by sacrificing control of the stack, you introduce opportunities for partners and customers to negatively impact the overall offering.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“By combining software with another, more readily monetized product — services, in this case — Amazon is able to efficiently extract profit from a growing, volume market. What’s more impressive, however, is that because Amazon is building primarily from either free software (in the economic sense) or software it developed internally, it is paying out minimal premiums to third parties for the services it offers. Which means that not only is AWS a volume business, it may be a high-margin business at the same time. Amazon does not break out its AWS revenues, so we’re forced to rely on estimates, but UBS analysts Brian Fitzgerald and Brian Pitz projected in 2010 that AWS’s margins would grow from 47% in 2006 to 53% in 2014. Last year, Andreas Gauger, the chief marketing officer for Amazon competitor ProfitBricks, estimated Amazon’s margins were better than 80%.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“The success of these projects and others like them is thanks to developers. The millions of programmers across the world who use, develop, improve, document, and rely upon open source are the main reason it’s relevant, and the main reason it continues to grow. In return for this support, open source has set those developers free from traditional procurement. Forever. Financial constraints that once served as a barrier to entry in software not only throttled the rate and pace of innovation in the industry, they ensured that organizational developers were a subservient class at best, a cost center at worst. With the rise of open source, however, developers could for the first time assemble an infrastructure from the same pieces that industry titans like Google used to build their businesses  —  only at no cost, without seeking permission from anyone. For the first time, developers could route around traditional procurement with ease. With usage thus effectively decoupled from commercial licensing, patterns of technology adoption began to shift.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“Given two technologies, the one that’s easier to obtain, configure, and use will usually be the one that wins. Convenience trumps features  —  even in situations where the more-convenient project is functionally inferior.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“As such, the company’s value from a technology perspective isn’t software, strictly speaking, but rather outsourced effort. Any business can download and run software like MySQL or PostgreSQL at no cost. But hosting it, keeping it up and running, backing up the databases, and exposing them safely to other applications requires expertise and effort. For many customers, and AWS customers in particular, then, the value isn’t in the software itself — because that is available at no cost — but the saved expertise and effort of consuming the infrastructure software as a service. Amazon, in other words, is making money with software, rather than from software.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“Where businesses once saw outsized returns from the code they wrote, today it’s merely a means to an end. It’s often not even a competitive advantage. What does this mean for those in the commercial software business? When considered in the context of acqhiring, it means that people are increasingly more valuable than the software they produce.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“Apple has long been an adherent to the full stack philosophy, delivering a tightly integrated experience that it controlled top to bottom, even if it outsourced the actual manufacturing.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“Imagine a labor market so tight that recruiting is done via acquisition. This is the reality that the technology industry faces today.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“If software adoption is the goal, it’s critical to reduce the friction to adoption. Ensure that your software is flexibly licensed, packaged for every potential operating system, available on the cloud, and as usable out of the box as possible.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“Vendors are becoming aware that their future relevance and viability will depend not on their salespeoples’ willingness to let the CIO beat them at a round of golf, but their ability to get the rank and file to genuinely value their technologies. As we’ll see, those that manage this transition most successfully turn sales from a costly and complex negotiation to a fait accompli.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World

“The weight of evidence for an extraordinary claim must be proportioned to its strangeness.”
― Stephen O’Grady, The Software Paradox: The Rise and Fall of the Commercial Software Market

“Amazon realized the importance of recruiting developers early  —  moving its entire organization to services-based interfaces. At the time, this was revolutionary; while everyone was talking about “Service Oriented Architectures,” almost no one had built one. And certainly no one had built one at Amazon’s scale. While this had benefits for Amazon internally, its practical import was that, if Amazon permitted it, anyone from outside Amazon could interact with its infrastructure as if they were part of the company. Need to provision a server, spin up a database, or accept payments? Outside developers could now do this on Amazon’s infrastructure as easily as employees. Suddenly, external developers could not only extend Amazon’s own business using their services  —  they could build their own businesses on hardware they rented from the one-time bookstore, now a newly minted technology vendor.”
― Stephen O’Grady, The New Kingmakers: How Developers Conquered the World