BW has a good primer on Web2.0 including a VCs view. Included is this little gem which highlights the importance of developing a compelling position – improving a larger company”s position isn”t that compelling:
Q: So many of these Web 2.0 companies are startups. How are they all going to survive?
A: They”re not. I can name only 300 of the 5,000 software companies out there that have a chance to change the world. At the other end, you”ve got large category leaders like Oracle, SAP (SAP), Microsoft (MSFT), Symantec (SYMC), and others, that basically are protected because they”re pouring money into tons of R&D to incrementally move their products ahead. The 70% of startups out there that are trying to do what the big companies do, only better, faster, and cheaper — it”s a fool”s phpaide.com errand. The customers would like to buy that from a large company, so they”re going to lose out.
Q: Does that mean that ultimately big companies, such as existing software companies, will get most of this business?
A: Not necessarily. I see a lot of software companies today saying, “We”re going to change our business from a product company to a service company and put our software online.” But there are problems with that. No. 1, the software company typically does not have the DNA to be a service company. It is a software company because the smartest guys in the company are developing new code, and that”s what they want to do, as opposed to what is the boring task of serving a customer. Salesforce.com does that. They”re not a perfect company, but they were developed with an intent from the start to be a service company. Also, product management is different. The sales force is different. Every function of the company needs to be changed if you”re serious about being a service company. It”s a two- or three-year transition at minimum. It”s not a flip of the switch.