Current project 20-25k/day development budget (including 2 sysadmins and 4 testers) total users under 100. And oddly enough the customer is happy and wants to expand the project. I was once on a project that spent 3 million / year and we had less then 40 actual users of a standalone desktop application yet after 3 years we ended-up saving the client money.
If it pencils out, why not? But this is a case of like serving like, and having been in this industry for awhile now the inefficiencies are phenomenal. Somewhere at the very end of the chain these costs are ending up at the end customer (in my case, the health care industry, and I don't want to go into too much detail about my company, but we're of a similar size and the market leader).
The enterprise is like government. It's a slow moving beast. But things will not continue like this forever; it runs on the same principle that initially made Microsoft successful and now is leading to its downfall. True story: last week I was contacted regarding a position at a health care startup in Palo Alto. We're primarily a hardware company and they're all software, but the funny thing is we have some skunks-work type projects that have some overlap with what they're doing. Having looked at what they already have on the market, if we actually wanted to go after them I don't think we would stand a chance. Sure, we might be able to leverage network effects to some degree; but time-to-market, overhead, etc, are on different scales.
Startups rarely compete in the same markets. Take an Airline doing 10 billion in revenue that ends up as 250 million a year in profit. Suppose someone discovers an inefficiency say in how they adjust routing based on maintenance scheduling that could save them 1/10th of 1 percent of their operating expenses. Well 10,000 * 1/1000th = 10 million a year in savings based on some investment. Sure, you could try and outsource the whole thing to India, but when every month the system is not up and running they are out close to a million dollars speed becomes important.
Of course that's the upside, the there are a wold of risks and many companies burn millions chasing after penny's.
How about SpaceX? They've already accomplished what no government in the world has been able to do. How about startups emerging in the energy, scientific, and education spaces? It's not all photo sharing, geo-tagging, social engagement rah rah. The discontent is obvious on HN over real problems not being addressed and companies are now beginning to emerge. Not only is it socially pragmatic, but as you so clearly detailed, it's mind-numbingly lucrative.
If you perform a technical service encumbered with vast inefficiencies, your lunch will be eaten in time. It's not a matter of if but when. Just because there are all sorts of barriers to entry right now because of government contracts, regulations, etc, that allow you to offer a solution right now that is cost effective because it's less messed up than the system you address, does not guarantee those walls will not be chipped away, bit by bit, by more innovative, smarter, cost effective ways of doing things.
SpaceX is creating a new system from scratch. But, at the end of the day they are not a software company so in 10 or 20 years you can expect them to be hiring the same consulting company's for internal projects that Lockheed Martin uses.
In the consulting world product is irrelevant you serve large organizations and the problems they develop over time. While they are young Google, Facebook, and SpaceX don't have a lot of the internal cruft that consultants exist to deal with, but I can guarantee they are creating it right now.
Amazon EC2 and GMail are probably the best examples of direct completion with traditional consultants by start-ups. But again it's all about the organization and and not what the organization produces and non of them started by focusing on that stuff. All large companies need email and don't necessarily know how to make is safe, secure, and salable.
PS: By software company, I am talking about mindset. GM creates a lot of software, but it's not what upper management focuses on day to day.
Think multi-national industrial conglomerates whose sales-forces each only numbers in the dozens, but who do m(b)illions of dollars in sales each year. Reducing the time it takes to estimate a new job and submit a proposal from weeks to hours is a very lucrative niche.
