Why social software won't dethrone the incumbents
It's not often I find myself fundamentally disagreeing with Sam Lawrence. He's a smart guy with a great marketing head. But on this post he's over-reaching in my opinion. His basic argument says this:
The big IT vendors aren’t taking social software seriously. They can’t. Not even if they wanted to. They’re wedded to a massive install base and business model based on extremely profitable file-based applications. There’s no easy way out.
While it's fashionable to beat the large vendors over the head with the latest shiny objects in our fashion led technology game, it is a foolish person who is prepared to bet against IBM, SAP, Oracle and Microsoft. The fact they have yet to establish infrastructures that allow them to credibly include the full gamut of social software (with the possible exception of IBM) doesn't mean they won't or can't.
All the above vendors are looking closely at social software and endeavoring to figure out where and how these technologies can be sensibly used among their customers. This is where it is important to understand what those customer bases broadly look like:
- Lotus aside, IBM is not a packaged applications provider but a build to order with consulting thrown in.
- SAP's traditional strengths lay in large scale manufacturing, petro-chemicals, oil and gas, automotive and pharmaceuticals, along with another 18-20 mostly manufacturing style industries.
- Oracle has strengths in retailing, government, financial services, healthcareand another 16 or so major, often services based industry groupings.
- Microsoft is a lot more broadly based, most often seen serving the needs of mid-market companies for which IBM, SAP and Oracle would be too complex and/or expensive.
These are broad generalizations but they should give a flavor of what these vendors are really offering. So are they doinganythingor is their DNA fused to a vision of the past?
I am aware that SAP, Oracle and IBM have extensive programs designed to figure out how the social computing landscape can be used as part of the overall armory of products and services with which they go to market. So to say they can't is just plain wrong. I will learn more about SAP's effort in the coming week. I'd like to know more about Oracle than I already do but that must needs wait. IBM keeps me up to date on their initiatives while I can't go anywhere without stumbling across Microsoft.
Sam's argument is based on Forrester analyst Rob Koplowitz's assessment of readiness among these vendors compared with the newer vendors like SixApart, Atlassian, SocialText, Jive, Awareness and others. While there is no doubt these category specific vendors have an edge, they're minnows both in aggregate and market impact. There is no doubt this market will prove attractive to others.
According to some reports, they're likely to be joined by a welter of newcomers looking to cash in on what they see as a new wave of technology innovation. According to Austin Business Journal:
Austin Ventures has bet $50 million on top Razorfish executive Jeffrey Dachis to create a social networking platform for corporations.
Dachis will be responsible for forming a new company and finding acquisition targets. He will serve as CEO and chairman of the Austin-based company.
Austin Ventures has committed up to $50 million for the new company.
"As companies begin to see the benefits of utilizing 'social' technology to engage their customers, employees, suppliers, shareholders, and communities in an active and transparent dialog, they will need a trusted partner to help them navigate the opportunities, and an integrated set of scalable, robust, and secure enterprise class tools to implement them," Dachis says. "We are here to provide both expertise and implementation."
My Irregular colleague Jevon MacDonald believes we'll see a welter of these startups come to market in the next 6-12 months, an opinion with which Sam agrees. So there's going to be a lot of money thrown at this by new vendors who won't have anything of substance to offer for at least a year to 18 months. That provides opportunity for the large vendors to get their houses in order and kill off the category. How?
Any time there is a new market, there is growth in the number of vendors followed by contraction and finally, as we've seen most recently in the business intelligence market, a disappearance of the category as independently viable. On this occasion, I think it will pan out differently to the past. Here's why:
The first company to hit $100 million in revenue from the stable of newcomers will be taken out by an offer it can't refuse. None of these companies are publicly traded yet investors want an exit sooner or later. That time cannot be far off for at least some of the players. We're in a time of accelerated development which means products maturing much more rapidly than the complex ERP systems of the past. That provides fresh buying opportunities and the companies with cash? You've guessed it: Microsoft, IBM, SAP and Oracle.
During Web 2.0 Expo, Dan Farber among others was asked his opinion about what we're seeing right now. Dan's view is that we're half way through a cycle of understanding what Web 2.0, which variously includes all the software classes mentioned by Forrester. That provides all vendors with plenty of time to figure out what social computing means. Right now, we're seeing the consumer facing aspects taking off, but little activity inside the enterprise.
While there's plenty of low hanging fruit to be had from harvesting the social graph, there's massive efficiencies to be gained from internal collaboration. This is a very different proposition and one the new players have little clue about. Incumbent vendors have been wrestling with various iterations of this topic for at least 10 years. Oliver Marks expressed it well in a recent post where he opined that:
Obviously there are some great entrepreneurial thinkers around web 2.0 but a lot of people seem to be under the illusion they are solving business problems for the first time - to give due credit to the Knowledgement Management and ECM crowd, they are wrestling with mission critical complex processes that have taken decades to sort out. This may seem dry and glacial to the sometimes attention deficit web 2.0 guys but it is the backbone business runs on.
Social software gives the newcomers an opportunity to tackle the problem from a different perspective. But as I've said before, it is a far from done deal. But there is a final element I'd like to introduce and that's the issue of purpose and ownership. This is something another Irregular, Sig Rinde has been talking about.
I side with the enterprise buyer, collaboration and social software as such is a good thing, for single task sandbox use. But an overall solution to the unstructured Barely Repeatable Processes in organisations they're not.
It's rather simple:
- Business is a value chain, a social value chain with a clear purpose.
- I am a part of a value chain and will have to do my part. For that I need ownership to what I'm supposed to do. Either I do it or somebody else does it.
- We all need accountability, if somebody else is dependent on what I'm supposed to do I better get down to it. And vice versa.
In social continuous processes, aka the value chains, ownership has to be clear and accountability towards the owner and all that is dependent on my work is a must. That's the reality meeting Web 2.0 when it redefines itself to Enterprise 2.0...
The only social value chain framework existing today; the organizational hierarchy, is in all senses counter to the philosophy of the open sandbox thus the current clash between old and new. Given that a new value chain framework is not delivered by the Enterprise 2.0 stuff, the enterprisey buyers will remain skeptical. And rightly so in my humble view.
If the large incumbent players seem slow moving, Sig's explanation makes good sense. These vendors are not going to play fast and loose with their millions of users or billions of revenue they collect each year. They're going to get it right - with purpose.