At IDC's Directions Conference last week, a presenter stated that customers use ~16% of application functionality. I can't find the source for the number, but directionally it seems plausible. If true, 84% of application functionality sits idle. Sometimes simple facts can put a lot of things into perspective.
1) Companies can do a few things very well (in fact 16% of things) and still retain customers. That is probably why there are 23K+ software companies in the US.
2) If you want to find the innovators in the industry, R&D spend is likely not a good indicator because a portion of it is focused on the unused 84%. For innovators, find the companies with the best market facing product management groups.
3) Good Product Management isn't being effectively utilized in much of the software industry. If it was, how would the other 84% even get built?
4) Customer demand for a la carte pricing is driven by their desire not to pay for the 84%.
5) The market is responding through a host of innovations that let customers choose only those features it wants ... Sale Force's appexchange, SOA, Open source, etc. Note that these aren't functionality innovations, but ecosystem and distribution innovations.
At the heart, this issue is about innovation. I think a lot of software companies think they drive innovation; that is what they think the other 84% of functionality is - unused innovation. In some cases they might be right and a big payoff ensues. But for the most part, responding to market needs is safer than trying to drive breakthrough innovation. The balancing act between the two is a key leadership function and one that companies continue to struggle with. Jeff Nolan has some thoughts on that here.