Top 10 Trends in Software Publishing

(Note: I posted this yesterday on Small Business Trends. I'm reposting here for convenience of readers of this blog.)

Like President Barack Obama said, it’s about getting up and dusting ourselves off. He also mentioned risk taking, and doers, and creativity.

In software publishing, as much as anywhere, the Web continues to change the business landscape. Retail markets go down in a double-whammy of technology trends plus macroeconomic factors, users look to leave it all online instead of install it from a CD, the rich get less rich and the newbies keep growing. Brave new world.

Here are my guesses for the top 10 trends in software publishing in 2009.

  1. Small, simple, and online. For small and simple, think iPhone applications — the most exciting new application market since Web 2.0. There’s magic in small price, big numbers. Ninety-nine cents, $1.99, $4.99, even $9.99 feels a lot like free to the buyer, but when you add volume, those same prices feel like a business model to the publisher. And for online, expect less and less software installed on the computer itself, and more on the Web. That’s obvious. That’s also software as a service (SaaS).
  2. Micropayments. This is related to number one, and particularly what’s happening with iPhone apps. People are finding ways to make money in 99-cent increments. That’s not easy at all, with processing costs, watching for fraud, automation. It used to be impossible. Then came iPhone apps.
  3. Moving up into the cloud. Lower costs, higher reliability make a game-changing idea. Everybody wants to move up with Amazon.com, for example. This doesn’t necessarily change the looks and feels of sites, though. The next game changer is what comes up after Amazon.com’s cloud goes down for a significant period of time, like hours, and the rest of the world discovers how many of us are hanging our laundry on their clothes line.
  4. Bootstrapping. In a world of rapidly lowering fixed and startup costs, while investors have migraines, bootstrapping happens. God bless the child that’s got its own. Slower growth, more independence. That will mean (see #7) free gets harder to find.
  5. Web applications start the circle game. Web apps are obviously going up, and CPU-based applications are going down. But in the next year, some will go full-circle as the Web applications figure out how to keep you happy when you can’t connect, like on the airplane. Normally it’s turn on, log in, there’s your stuff: Your word processor, spreadsheet, email, presentations, to-do lists, all of it. Watch Google with Gears, they’re leading the way. Again.
  6. Goodbye retail channels. Remember those software products you used to get in the office store, all boxed and shiny? Remember browsing the software shelves? CompUSA is gone, Circuit City almost gone, Best Buy and the office stores are cutting down on software shelves. Why? Well, when did you last buy packaged software in a store? You and everybody else. Those sales are way down. Remember the term shakeout? When a market stops growing, winners squeeze out losers. Anita Campbell, of Small Business Trends, recently wrote "we are seeing large popular products become distribution channels for smaller "satellite" products." That’s not just expansion, though, that’s them playing defense.
  7. More Mac, more Linux. This is another corollary of point #1, apps online. Applications have been the biggest pull for Windows and barrier to Mac and other systems. When they’re all moving steadily to online availability, that barrier goes down. It’s a lot more about Firefox vs. Chrome vs. Safari vs. Internet Explorer than Mac vs. Windows.
  8. Free is getting tougher. A lot like sub-prime mortgages, the free software model gets ugly if valuations go down. The idea is to get money from investors, then get users, which makes your valuation go up, so you can get more money from investors. That’s worked well enough for some, but this year investors are hurting, and valuations aren’t going up. So how do you make payroll? Corollary: terms like "business model" and "monetize" are coming back in fashion. I should add, perhaps, that some already-there big successes like Facebook won’t suffer, but that’s because they’re already established. What worked 3-5 years ago isn’t working so well anymore; not for the newcomers.
  9. Rapid development; also called agile development. It might also be called program as you go. Software used to be designed first, at great expense of time and money and brainpower, then programmed. Now they start it, use it, change it, use it, change it again, in the background. When they had to build those disks and put them in boxes and ship them to stores they also had to live with them forever. Now the app lives on the Web and you change it overnight.
  10. Developers everywhere. Not just big companies in India working with big companies in the U.S., but individual programmers all over the world contracting with companies of every size, also all over the world. My son Paul, CTO at Huffington Post, is working with individual freelancers in half a dozen countries. He makes it work as a team even though they are spread across all the time zones. As long as they have a connection. There’s a lot more where that came from.

As I read through these 10 guesses, I notice how really mixed the picture actually is. It would be hard to generalize about how things are in the software world. Some of these segments are bursting out of the seams with opportunity. Others feel like old businesses, getting older by the minute. At least we know it’s going to be interesting.

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