Software industry 'close to implosion'

Ray Lane, the former president and COO of Oracle, has warned vast numbers of software companies are likely to become extinct as dominant players monopolise their markets - and start-ups win credibility and customers in the middle ground.

Falling into the gaping maw that those two forces create will be all the mid-sized companies which don't own enough of their market to compete with their largest rival but are too large and too set in their ways to innovate at the same speed as the start-ups.

Lane told a conference of software customers and users: "You've got a lot of dead men walking in the software industry right now."

He said: "I don't see a future for thousands of software companies. They might continue to eke out a profit but I just don't see it. I think the big fat middle of the software industry is going to fall through."

One area where Lane said he expects to see growth is the software as a service (SaaS) industry, which will continue to put greater pressure on the traditional box shifters.

Speaking at Salesforce.com's Dreamforce user conference in San Francisco, Lane said: "Software as a service is at an inflection point. It happens first in the small businesses that don't have a lot of budget and it's moving up," supporting claims from the likes of Gartner, which recently said SaaS will account for a quarter of all new business software revenues within five years.

Lane said SaaS is likely to undermine a lot of established players who may lack "the DNA" to react.

He added: "Microsoft is in the best position to do something about this but if you've been selling software for so long then it really comes down to the DNA," saying large software vendors such as Microsoft and his former employer Oracle suffer inertia related to their heritage in shifting boxes of software and an unwillingness to change.

Mark Gorenberg, a partner at Hummer Winblad Venture Partners, said of SaaS: "This is the most disruptive time ever in software. This is the tsunami hitting right now."