In 2011, Marc Andressen wrote an article called Why Software is Eating the World. The central idea is that any process that can be moved into software, will be. This has become a kind of shorthand for the investment thesis behind Silicon Valley’s current wave of unicorn startups. It’s also a unifying idea behind the larger set of technology trends we see today, such as machine learning, IoT, ubiquitous mobile connectivity, SaaS, and cloud computing. These trends are all, in different ways, making software more plentiful and capable and are expanding its reach within companies.
I believe that there is an accompanying change—one that is easy to miss, but equally essential. It isn’t just that businesses use more software, but that, increasingly, a business is defined in software. That is, the core processes a business executes—from how it produces a product, to how it interacts with customers, to how it delivers services—are increasingly specified, monitored, and executed in software. This is already true of most Silicon Valley tech companies, but it is a transition that is spreading to all kinds of companies, regardless of the product or service they provide.
To make clear what I mean, let’s look at an example: the loan approval process from a consumer bank. This is a business process that predates computers entirely. Traditionally this was a multi-week process where individuals such as a bank agent, mortgage officer, and credit officer each collaborated in a manual process. Today this process would tend to be executed in semi-automated fashion, each of these functions has some independent software applications that help the humans carry out their actions more efficiently. However this is changing now in many banks to a fully automated process where credit software, risk software, and CRM software communicate with each other and provide a decision in seconds. Here, the bank loan business division has essentially become software. Of course, this is not to imply that companies will become only software (there are still plenty of people in even the most software-centric companies), just that the full scope of the business is captured in an integrated software-defined process.