The traditional economic mindset of software companies needs to change to meet the needs of the new challenges facing the industry. The belief that software companies work to different rules than companies in other sectors no longer holds water. The world has changed and the demands of customers and the market have become more sophisticated. Ken Berryman's presentation outlines the new factors affecting the industry and how companies can adapt to remain a force in the game.

Berryman explains how the world has changed for the software industry by examining, among other factors, the new constraints on growth rate, the demands of customers who seek an improved level of experience and will no longer settle simply for innovation, the ways customers are actually using software, the demands of a global market, and the competition for software margins.

Against this background the software industry continues to consolidate. This has the benefit of increasing stability but means that customers, suppliers, and partners need to understand how to work with larger companies.

The main part of Berryman's talk focuses on what he sees at the five key factors that any software company needs to address moving forward. Berryman explains each factor clearly and then looks at the methods companies can use to turn these opportunities to their best advantage. For all the potential difficulties facing the industry, Berryman is optimistic and believes the future is bright. He even paraphrases Mark Twain and suggests that reports of the death of the industry have been greatly exaggerated.

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Ken Berryman is a Principal in the Silicon Valley office of McKinsey & Company.

He is active within McKinsey's High Technology practice and is a leader of its North American Software and Services practice sub-sector. He has served a range of high tech clients on issues including corporate strategy, market strategy, acquisitions, and go-to-market improvement.

Ken holds an M.S. and a Ph.D. in physics from Stanford University, as well as an A.B. in physics from Harvard University. Before joining McKinsey, he conducted semiconductor research as a post-doctoral scientist in the electrical engineering department of Princeton University. He has also been a member of the technical staff at NASA's Jet Propulsion Laboratory and has lectured and consulted at research institutions around the world, including Japan's Atomic Energy Research Institute (JAERI), and the Foundation for Fundamental Research on Matter (FOM) in the Netherlands.

Resources:

• McKinsey & Company
• Software 2005 Conference

This program is from the Software 2005 series.

For Team ITC:

• Description editor: Graham Stewart
• Post-production audio engineer: Paul Figgiani