In the VC panel this morning there was a comparison of enterprise software to big pharma…

“Among other things, the panel discussed whether the enterprise software business looks increasingly like big pharma. The idea is that it has become almost impossible to create sustainable companies that have to sell their wares into the CIO’s office”

MikeJoe saw another comparison, you be the judge:

“If you read between the lines of what the panelists are saying, they’re actually not talking about the software industry, but about their own industry, venture capital. That’s the business that resembles the pharmaceutical industry, as it’s marked by a few huge successes, with most investments ending up in failure”

I really don’t know how anyone could suggest enterprise software is like big pharma when 1) the cost of starting a company today is less than ever before, unlike pharma and 2) enteprise software doesn’t take 7-10 years to develop, unlike pharma and 3) distribution options for enterprise software are expanding, unlike pharma.

The problem that these investors were identifying is that it’s increasingly difficult to create a business on the model that SAP and Oracle have perfected, big license deals with recurring maintenance revenue. However, even those businesses are facing the inevitability that this model disappears and are actively changing their respective businesses to cope with that.