VCs Spar Over Tech Direction

A couple of sharp disagreements punctuated an otherwise friendly discussion between the business rivals at a standing-room only hall at the Crowne Plaza, Cabana hotel here.

Ann Winblad, partner in Hummer-Winblad, probably went the farthest out on a limb with her prediction that big enterprise software firms Microsoft, SAP and Oracle will lose dominance in the $100 billion application software market over the next 36 months.

"The Internet is having a very disruptive affect on the software market," said Winblad. "Open source and software as a service, and peer to peer versus point to point.

"And also the completely new pricing and business models for newer applications will redefine the applications space to make today's leaders tomorrows laggards."

No one on the panel agreed with her, though they all liked the idea.

"I pray you're right," said Roger McNamee, co-founder of Elevation Partners. "There has been no incentive to compete for those market spaces, the customers are inert. They have implemented maintenance contracts and it's too much [effort and expense] for them to get off the elevator."

Winblad stuck to her guns, noting that her firm also meets with CIOs and corporate execs, which helped inform her forecast. "I think if you look at the budgets [corporations] have it's happening faster than you think."

To which Doerr quickly retorted: "It's not happening at all."

Joe Schoendorf, a partner in Accel Partners also dissed Winblad for wishful thinking: "I want her to be right, but it won't be in 36 months. We have a tendency in venture capital to be right about what's going to happen, but wrong about the decade it will happen."

"Voice runs as a free incremental service over data networks," said Jurvetson. "It's just like the transition to e-mail, you don't meter it. Communication is the fundamental lubricant of the economy."

Jurvetson said VoIP (define) applications like Skype has been a "geek thing," that's not mainstream because it requires a computer. "Cordless phones with Skype and then the Wi-Fi phones are coming."

The move to mobile communications is indisputable. Some 10,000 landline phone accounts are cancelled every day, according to Jurvetson. He said there will be plenty of innovation and business opportunity to take advantage of this new platform with new applications.

"Many businesses will be like an eBay for information."

Winblad agreed free and mobile voice capability is an important trend but "not as seminal as Steve says. Everything is becoming digital but we will be hybrid for a long time, including in the enterprise."

Schoendorf questioned the reliability and thus the ubiquity of new phone services. He asked the audience how many had a cell phone connection drop off recently and most hands shot up. "We have a long way to go to get to free voice calls [everywhere]," he said.

Schoendorf raised the heated debate over his prediction China continues its march to being both a low-cost producer and a low-cost, world-class innovator.

"They've gone from the copying phase to the innovative phase," said Schoendorf.

"Our competitiveness is my favorite trait, but I don't think we see what's going on in China.

"I get the feeling we view them like [we used to view] Japan; [their stuff is] low cost but we're the innovators with all the great ideas. But every time I go over there I see more fundamental innovation. I see China as our biggest competitor."

Other panelists didn't so much disagree with Schoendorf's assessment as much as what the competitive response of the U.S. should be.

"Joe's right, China's very important," said Doerr. "I'm not sure we can't collaborate with them, and seeing China succeed is probably more important than [trying to] to compete with them."

Winblad said China is an enormous competitive threat. "But it's not all bad news. Innovation needs strong drivers. This could be fabulous if we have the right leadership [to answer the challenge]."

McNamee noted that while's China's made great strides, it's trying to make a lot of technological progress in a short time.

"Their infrastructure has a long way to go," said McNamee. But he also said China's huge population and resources make it a major force in setting tech standards.

"Whatever standard China says cell phones are going to be is the standard we should follow and if we don't we're nuts. We should stay out of their way, and do something about [upgrading] their public health system and then they'll owe us ."


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