If you had invested in the benchmark iShares Expanded Tech-Software Sector ETF when Andreessen wrote his seminal piece in August 2011, you would have over 655% return. The stock of software giant Microsoft, the world’s most valuable company, is up 2,230% since then. The key to Microsoft’s resurrection after its lost decade in the aftermath of the tech bubble burst in March 2000 was its pivot to the cloud. Companies like Microsoft, Salesforce, Adobe, ServiceNow, Palo Alto and their ilk began providing their software as a service (SaaS) or a solution that enterprises such as JPMorgan Chase, Walmart, Exxon Mobil and others could purchase on a pay-as-you-go basis from a cloud service provider like Amazon Web Service, Microsoft’s own Azure or Google Cloud.
Software companies were, until recently, all the rage on Wall Street and Silicon Valley. More than a decade ago, web browser Netscape’s creator Marc Andreessen, now a prominent venture capitalist, penned a piece titled Why Software is Eating the World arguing a new golden age was dawning for the sector.
“We are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy,” he wrote. “More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defence.” Over the next 10 years, he argued, “many more industries (will) be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.”
