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By M.R. Rangaswami, publisher of SandHill.com and co-founder of Sand Hill Group [qi:010] They say that youth is fleeting. In the enterprise software industry, the youth are fleeing. One need only look at the hairlines of today’s software leaders. The current wunderkinds are not looking to […]

By M.R. Rangaswami, publisher of SandHill.com and co-founder of Sand Hill Group

[qi:010] They say that youth is fleeting. In the enterprise software industry, the youth are fleeing.

One need only look at the hairlines of today’s software leaders. The current wunderkinds are not looking to create the next wave of corporate computing applications, but are instead gravitating toward emerging fields, such as web 2.0, biotech, and anything “green.”

Bill Gates was 19 when he founded Microsoft (MSFT). Steve Jobs started Apple (AAPL) at 21. Even Marc Benioff was in his 30s when he founded Salesforce.com (CRM) — and at 42, he remains one of the industry’s youngsters.

Software companies need to do more to attract the next generation of business leaders who will drive the evolution of the industry for decades to come.

Software’s Aging Leaders

Here’s what opened my eyes. I looked around at the attendees of our Enterprise 2007 conference this summer and was pleased to see many of the enterprise software industry’s leaders represented, including CEOs, VCs, professionals and analysts.

But then I did a double take: The average age of this elite group (including yours truly)? 50 years old!

Steve Ballmer, Larry Ellison, Henning Kagerman, Dave Duffield…all of them are solidly in middle age. A tremendous brain trust to be sure, but who is going to take the reins and lead the industry into the next era?

The next eye-opener? In a survey given out at the conference, these highly-successful industry leaders were asked whether they would advise their college-aged kids to start a career in the software business. More than half said they would, but nearly a third said they wouldn’t!

So where are all the Gates and Jobs of today? Many young entrepreneurs continue to receive venture backing for software companies –- in fact, software regained its title as the leading venture investment category during the second quarter. Notably, however, nearly as many are receiving backing to go into biotech or greentech or other emerging fields.

And within the software space, young business leaders are choosing web 2.0, open source, SaaS or consumer applications over traditional business apps. These are all attractive fields, to be sure, but the enterprise software elephant in the corner is a $600 billion industry waiting to be fed.

The new guard of software leaders operates differently than the old guard, usually with far less capital. And they are tuned into the online culture like no 50-year-old can be: they’ve grown up with it, and as such will be able to bring the consumer online experience to the corporation with ease.

Before I get too much hate mail about age discrimination, and in light Google’s recent legal troubles, I want to be clear that I’m not advocating hiring younger people over older people. I’m talking about the need for people with new skills and new ideas who are young enough (in years) to ride out the next 10 or 20 years of industry fluctuations.

The fact is that unless the software industry receives an influx of new talent, it will be difficult for the 50-year-olds to keep their companies’ relevant in the next era.

How to Rejuvenate the Industry

It is time for enterprise software companies and their investors to take steps to make the industry a more welcoming and attractive place for young workers. Here are some of my thoughts on how to attract the next generation of leaders:

Make Room at the Top – It may be time for many longtime software company leaders to simply step aside. The same goes for members of the board. If Bill Gates can do it, anybody can.

By making a gradual transition (such as the one taking place at Microsoft) and tapping the right successors, software companies can receive the benefits of a fresh strategic perspective and a new outlook.

Mentor Young Executives — Much of the brain trust of the enterprise software industry is rapidly approaching retirement. The only way to recapture this collective knowledge is to impart it to the next generation of executives.

While it is nice to think that today’s young execs can learn by watching, the pace of today’s business environment may make it difficult. Companies seeking to preserve this insight should consider a mentoring initiative – either formal or informal – to impart to its younger execs.

Re-establish Entry-Level Positions — As the software industry evolved over the past 10 years, a wide variety of entry-level jobs in both business and engineering disappeared. Some jobs were outsourced, some were offshored, and some simply dried up during the economic downturn, never to be re-established.

There is no way that today’s software vendors will be able to promote from within and tap into next-generation thinking if they do not slot a significant number of entry-level jobs for new workers. These positions should be on both the technical and business side.

Step Up Marketing to Universities — There is a perception among college graduates that all technology jobs are moving overseas. Anyone who has recently tried to find an engineer in the San Francisco Bay Area knows that nothing could be further from the truth.

The job market for software developers is almost as tight as it was during the dot-com boom. Engineering graduates will have their pick of companies, and industries, to choose from.

The software industry associations and the major companies themselves must raise their profiles in graduates’ minds. Efforts such as job fairs and promotions at universities can help achieve this.

Develop Cross-Industry Recruiting Tactics — Recruiters are famous for tapping consumer packaged goods leaders to run tech companies – and for convincing former tech execs to run “green” or biotech companies. It is time for the software industry to expand its recruiting pool.

As other industries work to recruit the up-and-coming leaders that the software industry used to attract, the software industry needs to fight back. TCS is trying to overcome some of the talent crunch in India by recruiting talented non-engineers from other scientific fields for training as developers or other much-needed staff. The ramp-up is longer, but the results so far have been positive.

Make the Industry a More Attractive Place to Work — In many ways, the software industry has always been one of the best fields to work in. Today it’s even better.

The business environment is fast-paced and rapidly evolving. There is the opportunity for international travel, rapid advancement, telecommuting and financial rewards. The faster the industry can get the word out about these benefits, the better.

Set Up Internal, Innovation-Driven “Startups” — For many established vendors, incorporating the energetic and fast-paced climate of a startup is difficult to maintain as a company grows to have hundreds and then thousands of employees.

Many vendors, such as Motorola (MOT), have created internal innovation centers to foster the growth of new ideas, products and businesses. The atmosphere is more likely to attract a new generation of leaders.

I believe the software industry can do more to prevent the “youth” drain that I see happening today. What do you think? Is the software industry “older” than any other fast-growth industry? Is the entire concept of enterprise software fading away? Can vendors do anything more to attract new college grads? I welcome your feedback.

  1. Is it really Youth Drain. Or is it old Enterprise Application Drain. The youth are in newer software markets. Look at Facebook, Skype, and the front pages of Business 2.0 and Business Week. The youth are where it’s happening in software.

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  2. Bryan Stolle, MDV Friday, October 12, 2007

    MR:

    All is not lost. I noted the same lack of new blood at e2007, but that may be a reflection of our networks, not the industry.

    Many of my colleagues and I have discussed the “eat our young” problem in software, especially on the sales side. There simply has not been the needed investment to train/develop the next generation. So, your ideas are good and timely.

    That said, as an investor, I find myself with far more things to look at and consider then I ever expected. This is partly due to a new generation of business software entrepreneurs that have put in the requisite 10-15 years in business gaining the insights and skills needed to identify market needs, develop appropriate and economically interesting solutions, and launch them within fledgling companies.

    Of the IT deals we have funded this year, easily half are led by this new generation, and many of those are B2B/Enterprise 2.0 companies.

    Of course, the more we as an IT industry invest in the young talent, the more we will all gain.

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  3. If you look at the enterprise companies, they just acquire smaller companies, layoff the coders and outsource maintenance to india. Why would anyone want to be part of that?

    Enterprise is morphing into SaaS anyway. Once the playing field is completely level (when SaaS takes over), the Enterprise companies will fade and newer models will take over – like Google, Salesforce.com, Netsuite.

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  4. By looking at the first few lines I thought enterprise software would also close it’s door for the middle aged guys :-). Luckily, author clarifies it in middle.

    Anyway, one thing I am not sure if the problem is with age of workforce or the practices in industry that is so old (deal making always through contacts rather than merits). There are good companies run by young people in this field (e.g: Atlassian) they don’t get attention thats all.

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  5. M.R., I agree with Rick. Its Enterprise Computing that’s changing (the lines are being blurred) and the youth are in areas where there is opportunity for change. I would say that you have lost touch if you have not yet met with Paul Graham (or read any of his essays) of Y Combinator. Also look at some of the open source superstars like David Heinemeier Hansson (if you don’t think his Ruby on Rails open source framework is “enterprise” enough then you are living on another planet M.R. because look at how Sun Microsystems has reacted to Ruby on Rails and they are going all out with JRuby and look at what Dr. Jason Hoffman of Joyeur is doing with Rails + Sun platforms. And you may have heard about this great shift toward network-centric computing which is being pushed by a little company named Google (what young, aspiring person in the IT space would not love to work at Google where they can create dynamic systems such as Google Maps and systems that support mashups?)

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  6. I forgot to mention — there is this young guy who just hit his second home run. He name is Marc Andreessen and his company Opsware was sold to HP for over $1B USD.

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  7. Enterprise software in general is more time consuming to develop, and requires a much larger footprint to support than the kinds of markets that young entrepreneurs are attracted to. When a 22 year old can develop a website in 3 weeks, and develop a $100M company within a year, why would they bother with the troubles of attracting corporate customers?

    Also, with web-oriented companies/products, you can get away with a much smaller support staff, and in general the business models scale much more cleanly.

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  8. MR, great observation.

    But…The buying centers for enterprise sw age wise mirror what the software industry on average presents in its face to the customer – the avg sales person or consultants in the 30s or 40s. So not as much of an issue there – if anything when I was in India last week with a client the average age of 24 in many of the SIs does bother many enterprises.

    I do think enterprise software does need to reinvent itself with all the new web 20, mobile, sensory and other new technologies…that is the right way to appear young and vibrant…

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  9. Is there a youth vacuum in enterprise software?

    M.R. Rangaswami, one of my favorite minds in enterprise software, has penned a guest column on Om’s blog (another fave) where he reflects on the aging of enterprise software’s leaders:Enterprise Software’s Youth DrainOne need only look at the hairli…

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  10. M.R.,

    I think you bring up an interesting issue, and while I think your ideas for attracting and retaining young innovators are all worthwhile exercises, I’m not sure I see the problem of a youth drain.

    1) The industry is maturing. When Bill Gates was founding Microsoft at 19, the concept of “enterprise software” was just that, a concept. Now we’re looking at software comprising 40% of IT spend; it’s only natural that the impact of any individual (or small group) of young people would be harder to see; particularly for old dogs like all of us that have grown up with the industry.

    2) The lines have been blurring between enterprise software and consumer internet; where you still see really innovative youngsters (Facebook, YouTube, etc…); but there are young difference makers in software, too. You just have to look harder because they’re not making headlines on Techmeme and many of them are doing their best work INSIDE the large, mature organizations.

    I penned some thoughts in reaction to your piece at Ponderings.

    http://woodrow.typepad.com/the_ponderings_of_woodrow/2007/10/is-there-a-yout.html

    P.S. It’s been awhile. Sorry I missed Enterprise 2007 but we were relocating our offices that week of all things. At 32, I guess I might have helped bring down the age to below 50, perhaps. :)

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