16 Apr 2016

Tech Companies Are Eating the World

It’s well-known that software is eating the world. Not just software, but software built by tech companies as opposed to traditional companies.

When I was growing up, I was told that software is just one industry, and while it can make a word-processor or a search engine, tech companies play in their own domain, like other industries do. Tech companies can’t compete with banks any more than airlines can compete with banks, the conventional wisdom went.

Software was thought to be just an enabler. Any company could use software to make things better for their customers. While that’s true in theory, in practice, old-fashioned companies ended up using software to reinforce their hidebound ways of doing things. Software built by tech companies is so much better that it’s not even a contest. As a result, tech companies are slowly taking over from traditional companies.

For example, WhatsApp has replaced SMS for many of us. That’s a shift in balance of power from Airtel to Facebook.

As another example, banks are being disrupted by Apple Pay and Paytm and Bitcoin, which are built by tech companies, not banks. When a bank uses software, you get Internet banking. When tech companies get into payments, you have genuinely innovative apps like Apple Pay or Paytm.

Transport is being disrupted by Uber and Tesla and Google self-driving cars (disclosure: I work for Google), not by Maruti using software to make their cars better.

In all these cases, users are moving from using products or services built by old-fashioned companies to using ones built by tech companies.

In restrospect, what has happened is that when you give software to old-world companies, they merely use it to automate their existing processes, which were created in another age. They can’t think out of the box and attack the problem afresh, starting from a blank slate. Tech companies don’t have a legacy to defend, so they are able to attack the problem from first principles.

Old-world companies also had a monopoly — if Citibank sucks, where will you go? Another equally crappy bank? So, banks and phone companies and taxi companies and other old-world companies have evolved, or rather devolved, to provide as poor service as their competitors as their competitors. It’s a race to the bottom.

Tech companies, by contrast, live in a world where competition is a click away, as Google puts it. There’s no shortage of email providers or social networks or notes apps. If one is mediocre, users use another. This has led tech companies to be intensely competitive and to put the customer first. Google, Facebook, Microsoft and the other tech companies provide awesome service for free, while Airtel and Citibank provide pathetic service while charging users substantial money. What a travesty. The pricing is also complex, with many fees and charges and limits and so on. The pricing is not simple, like paying $100 for 1TB of cloud storage. If Citibank operated Gmail, you’d have an account opening fee, an annual fee, a password fee, and an attachment fee. Search wouldn’t work properly, and you’d have to call up customer service and have a 40-minute conversation at the end of which you’d be told that since you’re not a premium customer, search is limited to only the last week’s email.

Thankfully, as software eats the world, tech companies are replacing old-world customer-hostile companies. The world is getting better. Things are sucking less.

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