Will consumer-based technologies invade corporate computing?
The Economist ran an interesting piece in their special Christmas double issue about how consumer technologies are migrating to the enterprise. As an example, Arizona State university has migrated 65.000 students from its own in-house groupware applications onto Google Apps for your domain.
I believe strongly that this is a significant move that indicates what the future of enterprise computing will look like. But it's hardly new; learning platforms have for several years been a mostly software-as-a-service driven service and many large educational organizations has (perhaps without realising) taken the first steps towards migrating their systems to web-based services.
This raises one question; why has the learning platform in many cases been the "pioneer" in getting large organizations to choose Software-as-a-Service? The answer: the IT Directors, or more spesifically- the absence of the IT director. The purchase of learning platforms are largely run by end-users (teachers, school administrators, etc). This makes the organization focus less on hardware and technological perks.
So if you are a company that today (like Google, flickr, del.icio.us, digg, etc) get your business directly from consumers, is all you have to do find a way to circumvent the IT Director? Hardly. I see three major hurdles that must be faced for a consumer based company to successfully invade corporate computing:
Pricing
Most of the successful consumer services today get their revenues from text ads such as Ad-Sense. But a large company will probably not want to have their employees being distracted by adverts. For a university (at least in Europe) it would be politically difficult to finance their services through allowing their pupils and students to be subject to adverts.
Sales organization
Selling to the enterprise is something completely different than selling to the enterprise. You will need a sales organization that can handle large tenders, do key account work and "kick in doors".
Ownership
If you sign up for flickr you grant them a limited ownership of your personal data. They can expand their services an capitalize on you as a customer within the boundaries of the responsibility they have as a data controller. I believe that the enterprise, being a university or a large company, will not want to (and might very well not be legally allowed to) pass on their ownership of the data.
So will Google succeed with their Apps for your domain strategy? Probably - but it will need some modification. More on that in an upcoming post...
2 comments:
There is no doubt that SaaS is becoming part of the mainstream. Salesforce.com hit $500m annual revenue run-rate in the 2nd quarter of 2006. On the other end of the spectrum, as this Economist article points out, consumer-oriented software is going business class and is displacing the old work horses in large enterprises.
Ultimately it will not be about replacing horse carriages by cars (although that will happen), but about making a Model T affordable to a whole new class of buyers. I believe that the focus in SaaS will gradually move away from selling to large and medium enterprises to selling to networks of micro-firms. It will be about market expansion, not displacement. Growth, innovation and value creation will happen at this new edge.
I think I read an interesting question out of your comment: To what degree will the SaaS industry be disruptive?
I agree that a lot of the SaaS industry will grow out of the famous "long tail", as an expansion of the marked due to lowered costs and more affordable services. Still, some technologies could be in the unfortunate pathway of a disruptive wave of new services. New vendors will replace old once, or perhaps old vendors will learn new tricks. I believe that traditional groupware (e-mail, calendaring), enterprise homepage software, intranet solutions and other "off the shelves software" will be the first to feel the change.
The "disruption" will probably be equally felt (or even more) in the well established IT departments of large and small organisation. It is something completely different to run a piece of software yourself than managing the relationship with an external service provider. Keywords: SLA management, change management, problem management.
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