We saw a tale of two industries that was joined by a common theme. Customers are feeling freer to mess around – and even buy – software again, and investors are coming back in. “The VC community is finding higher value companies, so there shouldn’t be any more bubble effect,” said MR Rangaswami, in remarks opening Software 2007. And this year’s JavaOne, which was otherwise quite uneventful, had its fullest turnout in years. Companies have given their developers travel budgets again.

At the macro economic level, it’s a tale of cyclical spending. The bubble was followed by the bust. But whatever goes down must go up –- at some point. IT spending is a lagging indicator -– business must be well into an up cycle before they feel hunger pangs for modernizing their systems to cope with growth. And so, as there are questions on whether the 4 – 5 year old recovery from the bust is now flattening out, coming to a soft landing, or hitting a momentary pause, IT budgets are this point still on the upswing as a reaction to last year’s growth. (We’ve seen the same phenomenon in our consulting business, with vendors having accumulated a backlog of marketing projects.)

On the customer side, it’s safer to invest, or at least to kick the tires, and because of the new pricing structures brought on by open source and Software-as-a-Service, buying, subscribing, or simply evaluating new software no longer requires major capital commitments. That’s prompted legacy players — like IBM, Microsoft, and Oracle to offer free kick-the-tires “Express” editions of their products. And you’ve got vendors that incorporate freebie open source pieces so they can better focus on adding spot innovation, rather than having to reinvent the wheel.

In some cases, this makes markets downright boring. We ended the week at JavaOne, where aside from Sun’s useless announcement of yet another rich Internet client framework (we’ll get to that in a moment), we saw little if any news. Or, as our friend Bill Roth of BEA put it, “JavaOne never ceases to amaze me. Year after year, I expect the show to be a flop. This year is no exception. I am wrong again this year.” Roth was referring to the show’s turnout, which was probably the largest since the days of Sun being the dot in dot com.