"Assuming all software is free, why should I use your software?"

Its no secret that open source, virtualization and the natural maturation in some categories is commoditizing software to a layer as burnt in as system services; it is happening fast. Very fast. It wont be long now before we see higher brain functions like analytics showing up as a standard option offered by Amazon on EC2 or in one of their partner's machine image.  Layer in Amazon S3 for storage and you have a very cheap, theoretically infinitely scalable BI solution minus the integration services and data management processes. Both of these last two items make me think there is room for a data integration/clearing hub style online service to be offered by industry - kind of like the clearing systems used by banks/credit card companies and some of the services offered by D&B and Acxiom - a service that disrupts the traditional analytics value change where each company now doesn't need to do their own ETL, if you will... but I digress....

The question raised in the subtitle of this post was relayed to me by a colleague of mine. He was pitching software to an enterprise in Asia and was faced with this preemptive price negotiation tactic.  The take away lessons were that technology, while not worthless, is not differentiator (at least not for long) and that software companies need to continue to innovate and prove they are driving value with their business partners not just acting as a utility fueling it.  If a business is a car don't be in the fueling station business be in the on-board navigation systems that provide real-time detours based on traffic conditions- business.

It's interesting to see software companies like Opsware, QlikTech, and FAST out growing the broader market in three very different categories. It seams to me these companies have something in common and it isn't necessarily a focus on higher brain functions - They execute on their plans, focus on a niche market, and attempt (in very different ways) to collapse a value chain.