Software that gets distributed to every employee trends toward commodity

Put another way: commodity work breeds commodity software. This is why suites emerge (Office suite). They are lowest-common-denominator, but everything works together.

Exception: software for teams that drive direct business value. If a product helps a sales team close leads, or a dev team reduce costs by millions, the team will do whatever it takes to integrate that one-off software product.

Bret Taylor at ~ 32:00 in this Stratechery podcast.

BT: Let me talk about this suite versus best-of-breed thing.

I think it really matters who the buyer of the software is. So if you’re selling expense reporting software, you’re selling to a line of business, you’re selling to the finance department, presumably the CFO or someone under them will be making that decision. The fact that you have a big enterprise license agreement with Microsoft may or may not matter in that decision because the way you’re evaluating that is usually a business outcome, and if you can drive better business outcomes, the integration costs or whatever it might be of being a part of a suite matter, but it’s not going to be the dominant part of your decision-making. All things being equal, you might go with the suite, but when you’re measuring a business outcome, it could be different.

The interesting thing about all software sold into IT that gets distributed to every employee is it tends towards commoditization, because the marginal value of the 46,000th employee having a better messaging capability is very low. What’s interesting, though, is you go around the world, you’ll notice — I don’t know if this is still true, but often you’ll go to companies where the engineering team has Slack and everyone else has to use Teams. It shows you for them the marginal value of your engineers like communicating effectively is very high, you’re like, “Yes, we’ll choose the better product”.

If you’re buying your mobile phone plan, your messaging product, even your document product, you end up with this natural commoditization, which tends towards suites. The more you end up towards a measurable business outcome and a buyer of that technology that is, truly cares about driving, “I need more leads”, or, “I need better conversion here”, or, “I need to run this software on fewer GPUs because we’ve run out of them”, all of a sudden you care about the business outcome.

My take on it is I think you’re right broadly, but it actually matters a lot more for commodity or software that gets distributed to everyone at your company, and you tend towards this lowest common denominator suite orientation.