CIOs Spurn Web 2.0 Startups - Enterprises Want Suites and Large, Incumbent Software Vendors
Forrester Research has just released two reports concerning 'web 2.0' in the enterprise. Forrester recently surveyed 119 CIOs on the topic and their answers illustrate what IT honchos want – and don't want – from social software technologies such as blogs, wikis, podcasts, RSS, social networking, and content tagging.
According to the report entitled CIOs Want Suites For Web 2.0, the enterprise Web 2.0 market "is beginning to consolidate". Apparently CIOs have a strong desire to purchase web 2.0 products "as a suite, as well as an equally strong desire to purchase these technologies from large, incumbent software vendors." 61% of respondents indicated that they would prefer both a suite solution and a large, incumbent vendor. According to the report, "integration issues, longevity concerns, and the occasional lack of polish" are counting against small vendors.
Source: Forrester
This is a worrying thing, to my mind, as there is so much innovation happening with enterprise web apps by startups. At least the likes of Zoho and ThinkFree are suites, but what about all the focused startups doing 'best of breed' apps? But it demonstrates once again the value of partnerships amongst web 2.0 companies, or just being outright acquired by a bigco (as e.g. JotSpot was by Google last year). Forrester actually notes the latter trend, saying that consolidation in the Web 2.0 market has been happening over the past 18 months - e.g. Google acquired Writely and JotSpot; Cisco acquired Five Across and Tribe.net; Yahoo! acquired del.icio.us; and Six Apart acquired Rojo Networks.
Forrester recommends that small players "partner to create a tightly integrated ecosystem to go head-to-head with the suites". Recent examples of this, noted by Forrester: SuiteTwo, WordPress and KnowNow have a joint offering, and Attensa is coupling with The Real Time Matrix. Indeed Read/WriteWeb has been covering this trend - see our reports on recent partnerships by Zoho and Omnidrive, and Central Desktop and EditGrid.
Forrester also recommends that bigcos, like Microsoft and Google, "go on a shopping spree for best-of-breed technologies." Again, this is a trend that Read/WriteWeb has been covering over the past year or so. Google has been the most active in this regard, snapping up Writely and JotSpot - two leading Web Office apps at the time they were acquired.
Another Forrester report, entitled 'Efficiency Gains And Competitive Pressures Drive Enterprise Web 2.0 Adoption', concludes that firms using Web 2.0 technologies "are driven by gains in worker efficiency and a fear of competitive pressures." Meanwhile non-adopters cite "a perceived lack of business value" in web 2.0 apps. It was also noted that wikis and RSS are the two Web 2.0 technologies most likely to be adopted, while enterprises are largely not interested in social networking and blogs - at least, they were the technologies most likely to be viewed as unnecessary.
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Wow these figures are very important, definitely worth adding to biz plans :) thanks!
Ask the CIOs to consider where the greatest and most significant web 2.0 apps were born from, then ask them if buying a web 2.0 application from designed by a large software company will really provide them with a competitive advantage. YouTube, MySpace, and Flickr were all startups - if large software companies could innovate in this sector, we wouldn't have seen such frenzied acquisitions. And if a web 2.0 solution from a large software company won't offer a competitive advantage, why contemplate the ever troublesome and incredibly disruptive process of integrating new software?
Intel's Suite Two offering is looking pretty smart. According to the Intel team that drove the offering, what was originally intended to appeal to SMBs is getting the most uptake in large enterprise.
This is interesting Richard,
I have seen similar sentiments in loose talks with some of the CEO's I have talked to recently. it makes a great deal of sense if we think about it.
I think (for what it is worth) that consolidation of some of these entities is inevitable and really desirable. Thanks for putting this in concise and graphic form!
Richard:
This is an important article for anyone who is contemplating a new start-up. I suspect that there is one underlying motivation behind Forrester's findings: CIO's at big companies are paid to be risk averse. A central aspect of their jobs is to ensure that the network and it's attendant activities are always functioning. So, they are very wary of taking a risk on a new sart-up that (from their perspective) may not be around in a year or two.
This suggests an important hurdle for everyone involved in getting new businesses off the ground: Here's the perspective it suggests for the entrepreneru: "Even if what we set out to do functions perfectly, saves users money, and increases productivity, will potential buyers view us as too risky to build into their infrastructure." The next question, of course, is how start-ups can work to overcome this potential perception from the outset of their actvities.
Once again, thanks for highlighting this very important news.
Bruce Judson
Ventures Without Capital
Maybe most web 2.0 companies will get into the enterprise despite rather than because CIO's want it, maybe some small companies can start by using an ad-based approach initially?, or maybe we'll see the ISV's etc. start to add value by integrating some of this stuff into their corporate projects (I'd like to think using something like Blue Prism).
We really need to ask ourselves why only the CIOs are making these decisions - effective use of the web is intrinsic to successful business strategy - so we've actually hit a point where the CEO should want involvement in deciding the technology that will facilitate their business development. IT is no longer just workstations, back-ups, RJ45s and firewalls - unfortunately, many still see it this way.
I can see where a lot of the CIOs are coming from, but I very much see this as the "old guard" still being in effect. As Bruce mentions above, the majority of CIOs adopt the risk-adverse, cover yer butt, mentality - and go with the "safety in numbers" option.
But I think that as the new generation of CIOs come through this will change significantly. That said, partnership will still indeed be key.
Not surprised at the numbers or sentiment to be honest. If I were Microsoft/Cisco/IBM (maybe even Google) I'd be dancing a jig right now.
It's pretty clear CIO want to deploy the technology, they just don't want to risk their job on investing in a smaller cap company.
Henry Ford:
"If I'd asked people what they wanted, they would have asked for a better horse."
http://en.wikiquote.org/wiki/Henry_Ford
I would focus on the other number - nearly 40% of CIOs don't care if web2.0 applications are delivered by a small company. This seems to me to be a very high number for typically risk-adverse CIOs.
I am the CIO at a large government agency in the state of Illinois. Every time I hear Forrester or our main squeeze, Gartner, pontificate on Web 2.0 I cringe. These are large marketing organizations that have cozy relationships with large (read conservative, frightened and looking to extract as much money as possible delivering sub-standard service) vendors. They have no incentive to push anything that is innovative and are always pitching things that are seen to improve their revenue stream.
This does not mean they do not have influence especially in the larger more conservative part of the marketplace. It does mean that it is a good idea to take what they are saying with a grain of salt. Innovation is happening all over. When new technologies "prove" themselves, these guys will be on board telling everyone how they predicted this etc., etc.
I think it is important for new startups to figure out what they can do better than the larger more established vendors. Find someone who has a big need and a small budget. A sucessful engagement like this will speak louder than any stodgy pontificator and is a far more important key to success than a Forrester endorsement.
In fact to get Forrester or Gartner to endorse, a startup needs more capital than it can afford anyway. These organizations only endorse vendors who have made it. I would not worry about what they say if I was at the early stages of development. Anyone who pays close attention to them is probably not a good client at the beginning anyway.
I don't buy the Forrester research at all. Those guys have also published a report about Microsoft Office 2007, and its "web 2.0" capabilities (yes, you have read that right), therefore I don't think I am gonna buy what they say.
What I see though is college/universities moving en masse to the web 2.0 world. That is a BIG deal, guys. That's the first step to broad corporate adoption.
What we see with our Virtual Office websuite is that the main growth comes through from the SOHO and SME segment as well as the education segment. Representing a huge market opportunity.
Without completing the thought, a couple of commentators here have pinned the "spin" (in the positive sense) that small vendors should adapt and adopt.
As has been said, large companies are risk averse and are therefor by nature less progressive. It takes them longer to adopt new, useful technologies.
That comment is typically made about potential customers, but it is no less true about vendors. The large suites developed by established software companies do add some convenience and reduce risk, but they also carry with them longer development times and less cutting-edge.
In other worss, large software developers -- just like large potential customers -- are risk averse and less likely to have what will become the future.
If I were a start-up with a njew, cutting edge product, I'd openly acknowledge the potential risk but then focus on the lower cost and cutting edge nature of the technoloies.
Incidentally, I appreciate Stephane's comments about colleges and universites adopting the newer startup technologies. That indeed is the place to foster the future (read the histories of Unix or Linux or Mosaic, as examples). Universites want to be hip, and should be a primary market for strat-ups.
This is fascinating from a slightly different perspective than others mentioned above.
I was an analyst at Forrester from 1992-1994 in their "networking" service (e.g. IP network gear / services). During this time, Forrester analysts "took a stand." When George Colony (the CEO/founder) hired me, he said "Every day, try to figure out what makes you different from a PC Week reporter. They report; we think hard and try to make smart recommendations to CIOs."
In that light, this report sounds like Forrester finally fails that test. The conventional CIO wisdom is ALWAYS that the big guys will provide the desired solutions. And it's rarely right.
In our case, IBM's SNA networks were the "safe" bet, and CIO's nearly universally said they preferred to rely on IBM to eventually supply them with IP-based networks.
In that light, we analyzed IBM and others, and said that the networking technology was moving too fast, cannibalized too much of their existing business, and these (and other) factors would mean the big vendors wouldn't help CIOs get where they needed to go as fast as they needed to get there.
So we recommended CIOs bet on startups called Cisco, 3Com, Wellfleet, and others, *despite* what CIO's "said" or "preferred." This was the role of Forrester - to buck the conventional wisdom to provide *analysis*, not reporting.
And we didn't advise the startups to "partner" to penetrate enterprises; this would slow the fast-moving startups down, and be fatal to the industry. Instead, we advised the enterprises to take the startup risk.
Though I haven't read the Forrester report cited here, if the comments accurately reflect the report -- that the report simply warns startups that CIOs want big suppliers and startups need to partner -- then Forrester has reached the end of its useful life, IMHO. They've become an expensive PC Week - not an insightful partner in making strategic decisions to advance their enterprise customers' businesses.
Intel has made the buying decision easier for risk-averse CIOs and decision makers. Intel announced this week that they a product called SuiteTwo is now available for purchase. Itis a suite of integrated web/enterprise 2.0 tools (blogs, wikis, RSS, etc.)Intel deems to be "best of breed" in their respective categories. With the Intel stamp of approval, their distribution muscle and being first to market, this will be an interesting product to watch.
Who would have of thunk Intel would be driving Web 2.0 software innovation in the enterprise?
Intel has made the buying decision easier for risk-averse CIOs and decision makers. Intel announced this week that they a product called SuiteTwo is now available for purchase. It is a suite of integrated web/enterprise 2.0 tools (blogs, wikis, RSS, etc.)Intel deems to be "best of breed" in their respective categories. With the Intel stamp of approval, their distribution muscle and being first to market, this will be an interesting product to watch.
Who would have of thunk Intel would be driving Web 2.0 software innovation in the enterprise?