Software always wins. Hardware is always commoditized.
Here are a couple of reasons why:
Action over Information
We are all inundated with way too much information. Smaller and more prevalent hardware creates more and more data but, it is the software that ultimately turns it into usable insights. It is these insights that are ultimately turned into action, whether manual or automated, and it is that action that ultimately drives the results that make our lives better.
Adoption over Invention
Wearables and sensors may be all the rage, but only mass adoption will lead to sector success. Mass adoption occurs when the technological invention fades to the background and the software increases the value proposition. It happens when hardware becomes cheap enough for the masses to afford. It’s at this point that software, which requires a much smaller capital investment, begins to surge.
Iteration over Production
Hardware production is relatively costly. Throwing away flawed tangible goods means getting rid of the plans, raw materials, energy and labor that went into producing the product. Waste is significant. Software, on the other hand, is cheap. Throwing away software is as simple as pressing delete. The bits and bytes are gone. Waste is minimized. Experimentation, and thus innovation, is much greater.
Need more proof?
In 2014 the “tech industry” shed a significant number of jobs. Twelve “blue chip” technology companies are included on the list:
- Microsoft Corporation — 18,000
- Hewlett-Packard — 16,000
- Cisco — 6,000
- Intel Corp. — 5,350
- Maximus Inc. — 1,600
- LivingSocial — 1,500
- Texas Instruments Inc. — 1,100
- Verizon Instruments Inc. — 1,092
- Dell Inc. (India plant) — 1,000
- EMC Corp. — 1,000
- Intel (Costa Rica plant) — 1,000
- Sony Electronics — 1,000
A quick scan of the list, as well as a deeper dive into the specifics, shows an increasing trend. Hardware is struggling. Software is surging.
Microsoft, Hewlett-Packard, Cisco, Intel, Texas Instruments, Verizon, Dell, Intel, and Sony all shed jobs from their hardware-centric businesses. On the flip side, on this list, only LivingSocial is a pure software company.
Hardware enables innovation. Software is what actually drives it. And for that reason, in the hardware vs. software debate, software typically ends up on top.