I agree with his conclusion but I'm not being intellectually honest because I disagree with his major proofpoint, which -- naturally -- is based on his experience in enterprise software. Note that this Jim Manzi is not the Manzi of Lotus fame. That Manzi would know better because he was in the thick of the enterprise software industry back in the day.
Here is the observations that bothers me:
"A series of technical/business-model innovations — most prominently, Software-as-a-Service (SaaS) and open-source — is transforming the software industry, but the rational incentive of the incumbent managers is to suppress the innovations or, at best, slow-walk them and channel them in directions consistent with their current business models. So, right now, entrepreneurs, incumbent company management teams, and the capital markets are jockeying to seize the potential value that these innovations are unleashing.
"Large company growth will disproportionately come from adding not just more of the current “capacity” (mostly people) but the different kinds of capacity that are required for these new business models. For example, more software engineers trained in traditional languages and accustomed to working on large, structured projects are less useful for growth than engineers with experience in web-focused technologies and used to working in a so-called agile development environment. And it’s not as simple as incumbent companies simply changing their hiring specs; it’s difficult to transform settled company expertise, systems, compensation plans, culture, and so forth to operate in this new environment."
As I've written often here, including most recently concerning Red Hat (RHAT), neither supply side nor demand side market research back up the other Jim Manzi's observation.
Addressing Manzi's statements just from the demand side, there is simply no way you can say that IBM slow walked adoption of and adaptation to open source license terms and conditions given its seminal support of the Linux Foundation and the Apache Software Foundation over 15 years ago. Instead IBM -- and most other enterprise software market leaders -- co-opted the open source licensing approach in the mid 1990s as a brilliant way to control through-the-roof software development costs and to increase profits. As a result, IBM has surpassed Red Hat in that (I contend artificial) market. Microsoft (MSFT) was late to that party because it had an open-source-like community of its own given its desktop market dominance but even Microsoft had pretty much come around by the mid 2000s.
Similarly it's hard to question Oracle (ORCL) sofware as a service (SaaS) bonafides when you look at how early it co-opted the IBM term OnDemand to mean SaaS and how Oracle invested in -- not surpressed -- Siebel's struggling SaaS efforts after the acquisition. As a result Oracle will do about $500 million in SaaS revenue in 2010 and is likely second only to salesforce.com (CRM) by that metric. There is a tendency of armchair analysts to accept the propaganda of the salesforce.com CEO about such things rather than digging into the data (by the way, I have no problem with Benioff's propagandizing and have complimented it often).
I find no indication that these software market leaders are having trouble adopting web-based technologies (they invented most of them), hiring agile developers (another crock buzzword anyways), or otherwise given the user what he or she wants. There is much data from the demand side to knock down Manzi's assertions.
The one issue that open source and SaaS caused for many of these leaders (not IBM) is that they have slowly had to change their revenue recognition away from a balance of one-time upfront perpetual license streams and subscription services streams to a heavy does of the latter. (IBM was always heavily rental so the change was not a big deal and so insignifcant to its overall revenue that it is not reported anyways.) They still recognize that same amount of revenue (with a little lag) but just to have put it in a different bucket. Pay me now or pay me later as the old motor oil ad used to say. Services -- including professional services -- always made up 70% of most of these companies' revenue -- with the exception of the company formerly called CA after it was called Computer Associates -- so the transition has been no big deal.
And as I said, I still agree with the conclusion of Manzi's blog post:
"Despite the confident assertions of academicians, the Law of Unintended Consequences remains in force."
In this case, the unintended consequence was that the market leaders quickly took over tactical innovations that the venture capitalists thought would spawn new IBMs or new Oracles.
-- Dennis Byron
(no financial interest in companies mentioned)