Why every company needs to run like a software company

The new breed of digital players 'attack the companies where they are weakest, that is in software applications.'
Written by Joe McKendrick, Contributing Writer

If software is eating the world, then every company is becoming a software company. It doesn't matter if you manufacture tires, generate electricity, or provide health services. Software-driven competitors are ready to eat your lunch.

Photo: Joe McKendrick

That's why every business needs to learn to get into the software business, providing new types of opportunities -- and challenges -- for IT managers and professionals, as well as for the business at large. Karl-Heinz Streibich, CEO of Software AG, has seen this evolution commencing among his own enterprise customers across the globe, as they begin the journey to digital, I sat down with him at last month's CeBIT event to discuss the road ahead.

The first point Streibich raises is look at the new breed of companies entering and disrupting markets across the business spectrum. They are software companies in every sense of the word, technology-driven through and through. "All the digital disruptors are software companies, and they are basing their business models on software platforms, and these software platforms are much more agile," he states. An essential piece of this development is the rise of the Internet of Things, in which organizations are connected to a wide array of devices and products, providing intelligent views and insights on a continuous basis.

Ultimately, these software-driven disruptors are "throwing a wedge between the companies and their customers," he continued. "For the first time in the history of any company that exists today, there's a threat that takes away all your customers, that throws a wedge between a company and its customers,"For example, Alibaba, which operates a digital-driven global distribution an e-commerce network, supports about $60 billion transactions a year, and has "separated 500 million consumers from 50 million businesses."

The new breed of digital players "attack the companies where they are weakest, that is in software applications." "Digital companies already have a microservices oriented architecture, while existing companies have an IT application silo that is inflexible, not agile, inflexible -- a nightmare," Streibich observes, citing the example of an energy company that requires 1,200 people for its ERP applications. "They barely manage to keep it stable. How can they compete with a digital company?" Digitally savvy companies can do everything traditional companies do, but at a much faster speed, even in real time. "The dilemma of established companies is that in the new digital business model, the classic company needs has to be written in software. Not on paper, not hardware wise, but in software. That means this is a complete new media for classic companies."

As a result of these competitive threats -- and the need to make the shift to software to meet them -- organizations are looking to their IT talent for not only expertise, but leadership as well. CIOs, for one, "became the coordinators of outsourcing, the coordinators of implementing standard software, over the past one to two decades," Streibich says. "First, there was a data center focus, then a middleware focus, Now in the real-time economy, we have a new platform, and that is the IoT platform." He also advocates that the chief operating officer's role transform to that of chief digital officer.

For corporate leaders -- be they from the business or the IT side -- evolving into a software company means new modes of operating -- there are notable differences between the way a traditional product company operates and the way a software company operates, Streibich says. "In classic industry, you are very asset oriented, and assets only scale when you have mass production," Streibich explains. "In the software business, scalability is a different thing. In software, we can offer something in the cloud, that can be used by everyone."

While digital enterprise and cloud computing are inextricably linked, Streibich says there will always be a need for an on-premises IT organization to identify, provision and manage technology -- be it from the data center or from the cloud. "The question is, will organizations have their own infrastructure? They have to," Streibich explains. "As companies become software companies, how can they abandon the IT infrastructure? What they will use is more and more standard cloud services, and they will use hardware infrastructure as a service."

(Disclosure: SoftwareAG helped with my travel expenses to CeBIT.)

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