On Demand Apps are the Future – For Most

A lot can happen in ten years. Ten years ago Google purchased YouTube for an astounding $1.65 billion. We didn’t have stables of unicorn startups back then and many were surprised by the price Google was willing to pay for a startup only twenty months old with only $15 million in revenue. MySpace was averaging 51 million monthly unique visitors vs 14 million for Facebook. Google dominated search for the first time with $10 billion in revenue, blowing past Yahoo! at a relatively flat $6 billion. Mary Meeker penned another famous “State of the Internet” report and correctly predicted user generated content, personalization, and community were key growth drivers for the internet worldwide. She also predicted over half of all US homes would be connected to broadband by 2011 (it turned out to be nearly 70%). And I was retiring from making video games after a nice run at Sierra Online and EA.

The last major purchase I had to approve as COO of EA Canada (EA Sports) was an additional terabyte of high performance networked attached storage for our onsite server room. Each year we needed more storage as the games grew in size, but also to house all our financial and personnel information, email, SharePoint intranets, etc. All that information was considered too sensitive and important to ever live outside our firewall. They bought dedicated, high speed data lines between all studios — even for video conferencing! It cost nearly $500,000 to add one terabyte of high performance, redundant, backed-up storage in 2006. Today you can add a terabyte of high performance storage for under $10,000.

Salesforce was seven years old back in 2006 and had just passed $300 million in revenue. They were the poster child for what is now called cloud services or Software-as-a-Service. Even that was not enough to convince others at EA to let any bits outside our firewall. My mandate was clear: we control and manage all our data. Ten years later Salesforce earned nearly $7.5 billion in revenue in the past year and is valued at $50 billion. They are the new IBM (as in “no one gets fired for buying IBM”).

What allowed Salesforce to grow so fast in just ten years? I would argue it is a new regime of managers and decision makers. Keep in mind Amazon Web Services was still in “invite only” beta in 2006 with very little revenue. It’s on track to make $10 billion in revenue this year. Think about that for a minute. AWS was formed after Salesforce but has surpassed them in revenue in just ten years. Companies are hosting their entire operations with AWS whereas Salesforce was just customer data. One can argue low cost, ease and speed of setup, etc. are the reasons for Amazon’s success, and that is all true. However, even if all of the technology was available in the 90s it would not have taken off because the managers and decision makers at the time were focused on control. So as today’s managers and decision makers retire and a new generation takes over the next decade, what trends will explode into the next Salesforce or AWS?
It’s tempting to try to answer that question from a technology point of view, but It’s often not technology that is inhibiting adoption. It is people. For example, in 2016 it is common to pay a monthly subscription to listen to unlimited music on Pandora, Spotify, etc. The technology to stream music has been around since 1995 when RealNetworks launched their service. The problem was people at the time were used to owning their music on CD, vinyl record, or perhaps tapes. It was a cultural phenomenon, not a technological issue. They had been raised by parents that took pride in owning physical goods. It took a generation of people asking, “why do I need a stack of CDs in a nice wooden spinner rack?” to enable a new behavior – renting music. Sure technology advancements improved the experience, but it wasn’t the inhibiting adoption.
Don’t get me wrong, technology definitely affects what is possible or even probable. Uber could not have existed in 1995 or even 2000 because the location and mapping technology was not accurate enough. I still vividly recall getting lost (multiple times) on our honeymoon in 1996 because I was convinced we didn’t need paper maps. I had a state-of-the-art GPS receiver the size of a brick connected to the serial port of my Windows 95 laptop with map data from MapQuest. Unfortunately, there were too many missing roads and my laptop battery only lasted a couple hours. Looking at the intersection of technology and social trends is key.

Today’s workforce is comfortable with giving complete strangers a ride and even letting them stay in their home. Home ownership is declining and car sales are flat. Paying for a service when needed versus owning a car, vacation home, or music is the norm. Worldwide sales of smartphones will surpass dumb phones in the next year or two. Computing power will increase while cost decreases. Same for bandwidth. Social communities will continue to grow and sharing experiences will become quicker, easier and more detailed. A proliferation of data from sensors will allow augmented reality to finally become mass market. And it will become obvious to all that Apple peaked in 2015.

This isn’t about slowing iPhone sales in China. While that did hurt Apple last quarter, the bigger trend is app store apathy. What was novel and fresh in 2008 feels outdated and stale in 2016. I wrote about the decline of the app store a year ago and the numbers have only gotten worse. According to Quartz, the majority of people download zero apps per month. If they do bother to download an app, only 3% of them will still have it on their device after a month. If a company makes one of the 20ish apps on the home screen of my phone, then it should be a native app and take up storage and mind-share. But if I only need the app to complete a task right now, is the app store the best model? Do I really need (or want) to download, install and update an app for every concert, flight, museum, restaurant, conference, and retail store? Nope. And neither do you, according to the data.

Fortunately, the technology and consumer sentiment is coalescing around a new industry. It’s called a variety of names because it’s still nascent. Famous Industries has micro-apps, sonarDesign calls them On Demand apps, and Outsystems builds rapid apps. While the technologies involved are all a bit different, the promise is the same – remove the friction between the app author and the end user. A user wants the rich app experience without the hassles of downloading, installing, updating, deleting photos to make room, etc. Just the app. Now, please.
There has been a fair amount of misinformation about the performance of web apps. Some say they can’t perform as well as native apps, which is true for certain use cases, but not true for others. Forecast.io loads the weather faster on my phone than weather.com and scrolls beautifully. Others claim web apps can’t be used without data connectivity, but the HTML5 specification has very robust offline mode with version control and app usage data storage. Of course browser support for accessing native hardware lags behind, so it’s true you cannot access Bluetooth Low Energy (BLE) from a web app right now, but browsers do add support each year and many popular hardware sensors, such as camera and location, can be accessed by web apps.
There is so much less friction outside the walled gardens of app stores. You can publish and update instantly. Your customers are free from the app-cycle anguish. Best of all, you can create complex apps in about a fraction of the time as native development. It’s a much better experience than having to care and feed native apps for every restaurant I visit, my doctor, dentist, barber, bank, insurance, airline, etc. For email, messaging, games, and social I’m going to continue using native apps but for the rest I’m moving to on demand apps.

Nov, 01, 2016