It's an interesting narrative, but I can't think of any examples, since business is more about sales than "software iteration" - whatever that means.
Most of the successful startups that I can think of are still running basically the version 1.0 a founder wrote.
Can you provide some examples?
Also, you're mixing up the concepts/terms of software development (writing products) and IT. Software product companies don't call software engineering/development "IT" - IT is the guy who buys computers and restarts the wifi AP as needed.
- A true tech company arrives in the market
- They iterate faster
- Hire the few good members of your IT team, leaving you with the truly outdated ones
- Market share erodes
- "In this tough economy, we all have to make sacrifices"
- IT gets its budget slashed