"I believe the enterprise software industry is at a Crossroads. Its economic structure may be unsustainable," because most software companies can no longer afford to plow 50 to 60 percent of their revenue into sales and marketing or 25 percent into R&D, said Lane as he kicked off the Software 2006.

Currently, 85 percent of revenues are concentrated among 15 companies, with three companies making most of the profit. And one company, Microsoft, generates most of that profit enabling them to sustain the level of reinvestment to let them perform the "continuous innovation" that allows them to maintain their dominant position in the software industry. This leaves 5,000 to 7,000 software companies to struggle for the remaining slender share of profits, he said.

Lane cited seven "laws" for companies looking ahead in enterprise software:

* Serve an individual need.
* Seek viral, organic adoption.
* Provide contextualized, personal information.
* Require no data entry or training.
* Deliver instantaneous value.
* Utilize the community and social relationships to understand the user.
* Require a minimum IT footprint.

Technologies such as WebEx and Skype abide by these laws, Lane said.

Background: Ray Lane is a general partner at Kleiner Perkins Caufield & Byers and was both president and COO at Oracle.

Source: 1

Prashanth Rai