Enterprise software wars: 5 points of advice for CIOs

Enterprise software wars: 5 points of advice for CIOs

Summary: The consumerization of enterprise software has created confusion and opportunity for CIOs. This post offers context and advice.

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Enterprise software, long a complex domain only of interest to specialists, has become the darling of venture-capital investors and startups. This post presents context and concludes with advice for CIOs on navigating the changing enterprise software landscape.

Enterprise software start-ups 5 points of advice for CIOs
Enterprise software eats the world.
(Credit: Michael Krigsman)

To get a sense of growing interest in enterprise software, look at investment in the category. In the first quarter of 2012, for example, venture capitalists invested $2 billion in IT companies, marking a 14 percent increase in dollars over the same period in 2011. Meanwhile, investment in consumer Internet companies dropped 76 percent during the same period. (All numbers from Dow Jones VentureSource.)

As money pours into startups, top investors have announced the greatness of enterprise software. In a well-known piece in The Wall Street Journal, investor Marc Andreesen, argued for the importance of software in today's economy:

In short, software is eating the world.

My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.

More and more major businesses and industries are being run on software and delivered as online services--from movies to agriculture to national defense.

In an interview, Andreesen discussed consumerization of the enterprise:

In the last five years, there's been this sort of acknowledgment of the consumerization of the enterprise, which is consumer product development, design methods applied to business software, of which SaaS and cloud and all these things are examples.

The founder of startup Box, Aaron Levie, explained why the enterprise is so attractive:

Today, nearly every internet-connected, employed individual is a potential user and buyer of enterprise tools. And by making these tools accessible to users with just a few clicks, enterprise software providers can reach markets at a scale and speed that were impossible in the client-server paradigm.

Another investor offers a more prosaic view of why enterprise software is interesting--cash:

Straight-up enterprise subscriptions with average sales price of over $400,000. Not something that would be put on a credit card. In fact, it smells like enterprise software to me, and that sort of growth and deal size is sexy as hell.

For all these reasons, a new generation of startups wants to sell into the enterprise.

Next page:
The enterprise startup vision for tomorrow

Topics: CXO, Enterprise Software, Start-Ups, NextGen CIO

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3 comments
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  • Ease of change is key...

    Great article! Among many good points, you say:

    '...making business process changes with cloud-based software is almost as difficult. This is a critical point because process change issues, rather than technology, cause most enterprise software failures.'

    Spot on! Too many systems - old and new - are too hard to make even simple process changes to. When choosing enterprise software customers unfortunately focus on the ability of the system to cope with their (existing) complex processes, and on the perceived flexibility to meet different scenarios.

    What they don't investigate properly is how easy is it, post-implementation, to switch from one process design to another? What happens when the organization restructures, or goes through M&A, or has to meet some new regulations?

    Enterprises need to look at TCO (total cost of change) if they're to choose software that will stay with them for years and not cost a fortune everytime something changes in the business. Because guess what - change happens!
    DavidTurner1
    • Business process change is not a function of technology

      Technology, especially modern cloud software, is not usually the obstacle to change. The harder part is determining what the change should be and getting everyone on the same page. That part must come before making an technology changes.

      At some point, of course, you must change the workflow or process that is embedded in the software. Well-designed software makes that part easier than was possible in the past.
      mkrigsman
  • Agree on Ease of Change being very important

    Nice article, Michael. And it is so true about needing to be able to change the workflow and process in a software solution. Companies often think their processes contribute to their competitive advantage and so they want enterprise software to be customized to their specific needs. Yet, some beneficial workflow and process changes are not realized at the outset and only come to light after an implementation has begun, or after users are in full swing. Well-designed, flexible software can accommodate that.
    Molly Haskins