The end of software...

...as you know it. Right now I'm falling over startup vendors vying for attention in the so-called 'social software' space.
Written by Dennis Howlett, Contributor

...as you know it. Right now I'm falling over startup vendors vying for attention in the so-called 'social software' space. The fact enterprise people hate the term doesn't seem to bother those who are bypassing IT as they sell into the marketing departments of companies at departmental budget prices. But there is a battle brewing on two fronts.

First, we have the mega vendors who think they 'own' the enterprise but have little clue what they're doing when it comes to providing community style collaborative software. As Barry Libert, chairman of Mzinga said to me: "Does Microsoft have a relationship with me? Do any of the 'monster' vendors?" Second, we have the startups who are largely making their money by selling social media style solutions to marketers. While the two solution sets may look the same from the outside, they are being bought in fundamentally different ways and are setting up a tension that today is barely felt but which will have a disruptive effect on the software buying patterns of the future.

It is particularly appropriate that Phil Wainewright has penned an article dubbed Enter the socialprise as this plays directly to the themes I am currently exploring. He says:

But enterprise computing is still designed for the old, stovepipe model in which every transaction took place within the same firm. There’s no connection with the social automation that’s happening between individuals.

In other words they are transaction based. They are not people based. I'd go further and say they are departmentally constrained, reflecting the internal power structures they were designed to support. Fellow Irregular Susan Scrupski notes that:

Our clients are not resisting the changes afoot. They’re eager to learn about social media and web 2.0, but they face hard realities concerning what to even invest their time in, let alone their budget– which, by the way, is mostly already committed to legacy apps and operations expense.

I was intrigued by Susan's post and called her up. What she said threw into sharp relief the kinds of tension I believe will lead to war: "IT is largely taking the view that Microsoft Sharepoint and Lotus Connections are the way to go. In some cases, startup vendors that could offer a much faster time to value are automatically dismissed." In other words, IT shops are making sure the status quo is firmly maintained. But if you believe Libert, then this is entirely the wrong strategy because at heart, both Microsoft and IBM are offering behomoth frameworks that are file based, require development and are not people centric.

I then spoke to another Irregular, Jevon MacDonald who has been working in the so-called Enterprise 2.0 (aka socialprise) space for some time. He said that where the startups fail but where the incumbents succeed is in identifying a specific value proposition within specific industries. His view is that Sharepoint will be a 'big winner in the next five years.' If the amount of noise being made by Microsoft is indicative, then it should be a winner. But...he also says: "Sharepoint deployments are horrendous and I really don't know why people put up with them." I do. They keep IT shops busy.

Cue Mike Krigsman, who in similar vein says:

It’s time for IT to leave the ivory tower and become part of the decision-making culture of the business. The entire notion of IT as being somehow separate, or having independent goals from, the non-technical parts of an enterprise is absolutely ridiculous.

I'm not going to parse the extent to which IT shops wield power out of all proportion to their position as service providers to business. That's a well worn path. But I will say that SAP is waking up to the fact they need to find an audience with business leaders in the companies they serve and not just the IT shops. Part of that debate is being conducted on the tech centric SDN, where the SDN leaders are trying to bring change. In tandem, those close to the top of the SAP food chain are looking seriously at what this means. Last week, I spoke with Doug Merritt, who runs SAP Labs who said that: "Taking a FriendFeed approach will tell me much more about potential employees in the due diligence phase of hiring than I can get from HR." Did I hear a light bulb go on? Apparently so.

I'm thinking that SAP is realizing that it could get much closer to the millions of people who use its software rather than the IT shops that buy their stuff. The challenge, which Merritt thinks doesn't get solved for another 2-5 years, is how companies like SAP adapt their software design strategies to accommodate this new reality. Enter the startups.

The outwardly facing socialprise applications and services I am seeing are not just fundamentally different in approach, they are proving successful. Vendors like Jive Software, Wordframe and HiveLive are not only attracting inward investment but are making real sales. I have previously alluded to the success the likes of Dell, Nike and Intel are enjoying in engaging with community. Did you know for example that Dell offering Ubuntu is as a direct response to a massively positive reply when they raised the question with users? These vendors represent a fleabite in the scheme of things but folk like Sam Lawrence, CMO at Jive wonders whether the likes of Microsoft is really 'getting it.' Sam's swingeing remarks were enough to spark a Microsoft marketer into action claiming:

Interesting fodder here, but Microsoft is the only company in the world that can help organizations effectively integrate the future, present, and past IT capabilities to solve their business problems. Re: all the newfangled social software in the market these days, it’s great to see customers experimenting with this or that, but ultimately, they’ll understand the realities of bread, butter, cheese, and mousetraps as I’ve blogged about at http://sharepoint.microsoft.com/blogs/lliu/Lists/Posts/Post.aspx?ID=19

That's a p-r-e-t-t-y big statement which I roughly translate as: "Get lost." And while I wonder at the wisdom of engaging in what Jevon calls a 'schoolyard brawl' with Microsoft, the reaction indicates that Microsoft is determined to protect its turf. But will the IBM/Microsoft approach, based as it is in the past, be enough to win the day?

I'm going out on a limb here because many of my colleagues look at history and think it kinda repeats itself. I disagree. As Limbert says, startups are the future winners. While today, the top slots in the enterprise market may be the same as they were 10 years ago, let's not forget that Facebook (as an example) came from nowhere in 2006 to dominate the news in 2007 and gathered the now fabled $15 billion valuation. Microsoft may be aligned to Facebook on advertising but that leaves Facebook owning the customer relationship. Duh? Google went from strength to strength and many believe the war for dominance of the 'internet cloud' is already over with Google declared a winner. So picture this:

The startups who are doing the outside in stuff as outlined above become established in 2008, deepening their understanding of how relationships are created and sustained. One of them realizes that the people centric principles delivering CRM 2008 value can be equally applied to Social Capital Management. In other words, they can supplant today's Human Capital Management solutions. What happens then to so-called core business processes? I think SAP knows, even if it might struggle to get there. I'm not convinced that IBM, Oracle or Microsoft are remotely close. Libert most certainly knows even if the eventual 800lb gorilla's identity is yet to be revealed. As the old saw goes: we live in interesting times.

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