Let There Be Apps

We are at the beginning of a Cambrian explosion in the application space. One whose effects will have wide-ranging impact on the economy, industry and society -- some of which, no one can foresee.

However, I can see why this explosion is happening now. In particular, I see four main enabling factors, each of which represents a disruption to some historical barrier:

• Commoditization of technology. Driven by IaaS and PaaS, every day it becomes easier to create increasingly sophisticated applications with fewer resources devoted to low-level technology and infrastructure issues.
• Commoditization of distribution. App stores, social platforms, and search engines are succeeding in creating a meritocracy that favors good apps (as judged by consumers) -- independent of marketing budget or sales savvy.
• Commoditization of knowledge. User experience, game mechanics, social science, and more are leaking from the niches they were born in and spreading into the public domain. Modern entrepreneurs are increasingly aware of the successful processes that give rise to good apps (agile, data-driven, user-focused, etc.).
• Modularization of apps. APIs provide a programmatic way of gluing together highly-specialized apps, negating some of the network benefits of monolithic apps. For example, Nutshell CRM plugs into MailChimp, so you don't need an app that does both email marketing and CRM. SnapEngage plugs into SalesForce. Etc.

The ongoing demolition of these historical barriers is leading to increasing speciation. There now exist more than one million applications across all hardware and software platforms.

You read that right: more than ONE MILLION apps. And that, as I see it, is the tip of an iceburg.

Some technologists envision a future in which a small number of hulking applications provide such an enormous breadth of functionality that they serve the needs of the many. I envision the exact opposite: a future in which a huge number of smaller applications provide focused functionality to particular niches.

A CRM for businesses? Hah! How about a CRM for owners of dive shops? A social network for people? Bah! How about a social network for indie musicians in Cincinnati? A business intelligence tool? Nonsense. How about a BI app for your SalesForce.com account?

Consumers have demonstrated a strong preference for specialized applications. As business, IT and developer software all become consumerized, apps in all sectors must further speciate and tend towards ever more narrowly focused niches.

If this is correct, there are some interesting consequences. Among them:

• The current startup boom is not just a fad, but an expression of the way the software industry is changing. We can expect robust growth in the startup space over the coming years.
• The size of the pie is growing, but not as fast as the number of apps, which means the average app's share of that pie must decrease.

The current trend towards everything-is-a-platform can be seen as an attempt to exploit speciation. Companies try to weave their tentacles into the fabric of numerous apps, because that makes it easier for them to get more of the limited pie.

The proliferation of apps has numerous benefits for consumers and tech employees. It also has implications in the capital and M&A spaces.

I suspect the app explosion will usher in new models for funding app developers, that it will change the investment philosophy for many venture capitalists, and that it will yield a new generation of data-driven companies like Zynga, who compete on their ability to consistently create and iterate on entire families of apps that drive revenue.

Welcome to the Cambrian era.