Why social software won't dethrone the incumbents

Why social software won't dethrone the incumbents

Summary: It's not often I find myself fundamentally disagreeing with Sam Lawrence. He's a smart guy with a great marketing head.

TOPICS: Software, Browser, IBM, Oracle, SAP

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:

  1. Business is a value chain, a social value chain with a clear purpose.
  2. 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.
  3. 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.

Topics: Software, Browser, IBM, Oracle, SAP

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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  • Those are all smart arguements

    Apple, Salesforce.com, Google, VMWare, Amazon:They're companies who were supposed to die and/or who grew from nothing. If it's a forgone conclusion that the big IT guy landscape is cemented, then we should all just give up and go home.

    The throne that will be upset will be the part of software that people use to communicate and collaborate with each other. That's not ERP, CMS, etc. The big guys can have that.

    For sure they'll snap up younger companies to compete. They'll buy their way and turn on their sales engines. But in the meantime there's a lot of room for 1-2 companies who don't want to sell out to build a big, competitive business over the next few years.

    Social software could be just a feature. It could be something easily replicatable and noting more than a gnat. Or it could be something much bigger and not easily replicatable. I guess we'll see what the big guys come up with in a few years.

    It's hard to imagine an underdog winning. But it's a fantastic thing when they do.
  • RE: Why social software won't dethrone the incumbents

    Thanks for coming back Sam though I think you miss the point. I'm a huge underdog fan but that's not what this is about. It's about having perspective on what delivers. Social software is unquestionably good at delivering outward facing value. But - right now, it has no place in collaborative engagements. I argue that's where you release value as to creating. Much easier if only the players understood the issues.
  • What is social software?

    Nice article, good arguments but what exactly that social software is?
  • RE: Why social software won't dethrone the incumbents

    This is a very thought provoking post on many levels particularly when you have been heavily engaged in the complex currents and prevailing wind changes typical of the ecosphere in a large enterprise. Not to mention financial justifications which Dennis clearly has a very solid handle on.

    There's great advantage to creating synergy between the enterprise juggernaut backbone and the lighter more agile emergent Enterprise 2.0 app owners. I was chatting with Rod Boothby, VP of Platform Evangelism at Joyent last week, who told me he's seeing new management roles around 'light engineering' in the enterprise to manage the cloud and SAAS.

    The challenge is getting these two groups to talk to each other - not the vendors, opposing factions inside the enterprise. Sig Rinde's quoted post is excellent: "Business is a value chain, a social value chain with a clear purpose". At budget time this type of thinking is central to decision making.

    The IT guys can make a no brainer case for keeping lotus notes running ('the backbone' to senior management), while mission and metrics for enterprise collaboration processes and technologies, particularly if not built on solid foundations within the enterprise (for example a ground up informal adoption or ownership in a single silo of many competing ones), can have a hard time justifying its existence.

    Sig's 'Barely Repeatable Process' - a bespoke solution to a problem not solvable by the big boys - will get budget justification, because of understood value. Collaboration, while clearly valuable, is being hurt IMO by a lot of very rapid change in the E2.0 spacecoupled with confusion in the marketplace with facebook style 'poking' and 'funwalls'.

    The guy with the checkbook may well have teenage daughters who spend their lives on facebook and don't get any work done - I had this conversation recently with someone in senior management while explaining enterprise collaboration. Not helpful.

    Happy talk about 'groundswells' (a great book but superficial takeaway by people who skimmed it seems to be ad hoc adoption) and buzzy new tech that will be out of fashion in a year isn't going to make collaboration technology the backbone of the enterprise, which is where ultimately it will be.

    The sweet spot is synergy between backbone and agile limbs as separately debated by Sam with his 'enterprise octopus' analogy. I suggest that those who do that best will either become profitably (for the founders) subsumed into a larger organization or be key partners to them in a growing space...
  • RE: Why social software won't dethrone the incumbents

    Hi Dennis. In theory I agree that no one should be underestimating the large players. In particular, Microsoft and IBM are coming on especially strong with social software. At nGenera (and how could you mention Dachis' startup- emphasis on start- and not us?), we've been at this for a while now. Our blue chip customers need a reason to implement social software, and that reason must be linked to a positive economic outcome. The winners in this category are not going to be vendors (small or large) offering next-generation technology tools, but rather next-generation business improvement measured by old-fashioned business metrics like increased sales, healthier eps, etc. In order to do that, you need a holistic understanding of all the changes clients face getting to that next level.

    The challenges addressing the corporate DNA overhaul which you've mentioned in previous posts is formidible. Throwing sexy software at large companies isn't going to seduce a corporate executive to take his eye off quarterly targets. This is where the boys and men will divide. (Forgive the sexist remark--remember, it's me).
  • RE: Why social software won't dethrone the incumbents

    Another great post Dennis.
    Scott Quick
  • RE: Why social software won't dethrone the incumbents

    Hi Dennis,
    Nice post. I agree with your assessment in the context presented, but would argue against a fundamental premise of your argument. To quote Apple, "Think Different". Taking Sig Rinde's quote, I'd argue (and we've [nGenera has] researched and are betting on this being true) that the traditional hierarchical organization of the last century is about to be upended in the Global 2k over the next decade. This is what Tapscott's Wikinomics is all about. Value chains will still have process and ownership, but the core (inside the enterprise) will now be tighter, and the processes will be more collaborative and connected with the external enterprises (think "retired" boomer former employees as extended workforce).

    In this context, new enterprise social applications must emerge to support the social (collaborative) value chain. The debate here and elsewhere in the blogosphere this week seems so focused on blogs, wikis, and social network applications as the next wave of enterprise apps. I'd argue that this is being viewed through the wrong lens. These apps are enablers and are opening our eyes to the possibilities of a social value chain for enterprises and the benefit of collaboration, but are not the end. I could easily buy and agree with you and others that Microsoft, IBM/Lotus, and Oracle/BEA will highly likely own this part of the plumbing (and may be buying those startups in getting there), and they will pace themselves in getting there, leveraging their huge installed base

    However, what the large incumbents will not acquire in the near future (if they did, they'd just screw it up) nor will they be able to compete with are the new providers of these next generation applications and processes. It's not in their DNA. This is the bet nGenera is making from my viewpoint. In fact, we're not even viewing the huge incumbents as competitors, as we will be building on a lot of what they have done and will be doing going forward.
  • RE: Why social software won't dethrone the incumbents

    Although I am in violent agreement with not underestimating particularly Microsoft and IBM, and with much of your point of view, one central premise fails me in three of your statements...

    1. "...there???s massive efficiencies to be gained from internal collaboration...a very different proposition and one the new players have little clue about."

    2. "...Social software is unquestionably good at delivering outward facing value. But... has no place in collaborative engagements..."

    3. "...Right now, we???re seeing the consumer facing aspects taking off, but little activity inside the enterprise."

    I am curious that you do not see the vast proliferation of collaborating using wikis and blogs? I would agree the fascination with the Social-UI of personal networks, friends, followers, and such is yielding marginal value inside enterprises.

    But, strip away this fascination with the social network and these features. This is the whole problem with defining Enterprise 2.0 software as having to be social. There???s more going on here.

    10???s of thousands of companies are collaborating on wikis right now. More often these are technically oriented teams, but often not. Their wikis have 5 or 5,000 users, and the proliferation of 10,000 - 100,000-user wikis in the Fortune 50 is indeed real. These people cannot share information with a document management system easily. They know shared drives suck. They are buried in email. The simple features of editing a web page and linking have blown open new ways of collaborating.

    Ah... but is it efficient? Certainly it???s more efficient to purchase, get running and administer. But what about the ???Barely Repeatable Process??? you cite?

    That???s the whole point. That???s precisely why they are everywhere, in every industry, and every size company. Wikis are not apps. It???s a tool Desperately Seeking Structure. It???s all about the knowledge worker adapting to his or her unrepeatable process. Wikis are akin to email, and other tools; they are not akin to apps like ERP and CRM.

    If I was in the ROI business, I would send you some data to assuage your concerns about efficiencies. But I???m not because I think the vast majority of ROI talk is Patent BS. [Tell me about the ROI studies of email.] I???ll leave that to the Holistic Consultants.

    Otherwise I love the article and expect the Big Software Guns to get some of this right. I would never underestimate Steve. :-)
  • RE: Why social software won't dethrone the incumbents

    What exactly do you mean please by 'sandbox' in this context?
  • RE: Why social software won't dethrone the incumbents

    nice posting, thank you

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    • RE: Why social software won't dethrone the incumbents

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