Like an oyster, software as a service business models are best consumed in one gulp rather than nibbled over time.

You’ve spent years developing your product and its market. People, without much regret, pay hundreds of dollars to buy it. Everything gets better with each successive version as you add more and more functionality. Many have tried, but no one can even really dent your appeal or share. You’ve done so well at becoming the gold standard that your product name has become a verb. Your biggest problem is not adoption, but rather piracy. Seems like you have a winning business model.
Enter Web 2.0 where traditional software companies could not afford to match your truly impressive feature set–needed to challenge you at retail–a couple of guys with little or no funding can now duplicate the core functionality that accounts for the bulk of actual usage. Your lock on the retail market that worked so well for so long means nothing when Web distribution lets the upstarts go straight to the user.

Its meteoric rise is the envy of executives and geeks around the world… for those in technology, it is a marvel of Web strategy, and for Wall Street, it just may be the company all aspire to own.
No view of what matters in 2007 could be complete without mentioning Google. I’m going to propose something really crazy–actually blasphemous–here in Silicon Valley. I’m going to go out on a ledge.

We recently completed a project for a firm that was considering an investment in the digital photography business. They wanted a survey of the competition, so we dug into all of the startups and new companies bubbling up out there.
We were surprised by the large number of companies that were looking to give away photo editing and photo sharing software. Literally dozens of firms have sprung up that will give you free applications or free storage space for photos. We’re used to seeing free software in the Web 2.0 world, but usually there are just two or three such companies in each market category. In this case, we found dozens.

Recently we’ve been hearing that more and more. The companies being targeted usually assume they’ve being singled out for special attention from Microsoft, but when you add up all the reports, a different picture emerges. Microsoft is targeting almost every major tech company, all at once. This is a fairly new behavior for Microsoft, and it means the rules of competing with Redmond have changed as well.
Not so many years ago, Microsoft was famous for its ability to focus on one unifying goal. The cry would go out: “Make Windows the dominant OS,” or “Make Internet Explorer the dominant browser,” and the company would rally around that cry.
Today, the threats to Microsoft are different. The famous “Internet Services Disruption” memo written last October by Microsoft CTO Ray Ozzie is notable because it attempted to focus the company against an entire sector of the tech industry, rather than against a single competitor or product.

Recently we’ve been hearing that more and more. The companies being targeted usually assume they’ve being singled out for special attention from Microsoft, but when you add up all the reports a different picture emerges. What is not new is that Microsoft sees you as nothing but a bucket of money to them. What is new is that Microsoft is targeting almost every major tech company, all at once. This is a fairly new behavior for Microsoft, and it means the rules of competing with Redmond have changed as well.

For every successful market entry, another four fail. We learned that in grad school. One of the few facts that made practical sense, and thus stuck. So it’s a brave company that tries to do market expansion, and Cisco is doing it in a new way that’s worth learning from.
When even your smallest movement makes waves in the market, how do you find the lever that moves you to growth?

The RIM Blackberry folks finally settled their patent dispute with NTP, averting a feared shutdown of the service. That dispels the ominous cloud hanging over the Blackberry, and now the company can go back to growing wildly, right?
Not necessarily. If RIM’s watching the landscape carefully, what’s happening now is more like emerging from the storm cellar after a thunderstorm only to find two funnel clouds on the horizon.
One tornado is Microsoft. The other is market saturation.