Innovation Deficiency Syndrome

Over the years, and in particular in the years since the end of the dot-com boom, I've identified a disease which has come to plague the Enterprise Software Industry.

I call this disease, IDS: Innovation Deficiency Syndrome.

It afflicts all software companies as they grow and add customers, and introduce new releases. It happens as software products mature and introduce new versions and expand their customer bases globally.

With new releases come the maintenance tail of older releases. With more customers come increased complexity of use-cases, identifying more defects and creating more enhancement requests.

This maintenance tail weighs down innovation, consuming R&D resources with incremental improvements and fixes to known issues. This is IDS. It is so extreme at the "Big Four" software companies (IBM, Microsoft, Oracle & SAP) as well as at other larger software companies, that they are forced to resort to acquisition in order to introduce innovation and enter new markets. At the same time, the quality of their products often degrades as it is forced to be "all things to all people."

Unfortunately, VCs are less interested to fund enterprise software startups because they often don't reach the scale and valuation to support their desired exit strategy. Bruce Cleveland comments on this in his blog: http://tiny.cc/ThF8z

I see a clear "Innovation Gap" that needs to be filled. How can we maximize our innovation in this industry? How can we cure IDS?

THE CURE

I say the next enterprise software start ups shouldn't even try to grow into mature software companies. Instead, they should be specialized "innovation think tanks" who create products and sell them off to larger firms to market, sell, support, and maintain. They can either do this on a royalty basis or lump sum or series of set payments. This type of startup would scale by hiring more "innovator" employees to address new markets or specialties - employees who crave the creative challenge and dynamic work environment of a startup.