Executive Summary

Although still at its very early stages, the infiltration of the new internet technologies (Web 2.0) into the business world is a fact. In the past two years the demand for web-based business solutions has been on the rise, and is expected to increase.

Under the relatively new area dubbed ‘Enterprise 2.0′, the new internet technologies (Web 2.0), and especially the concepts surrounding social networking and user-generated content, are breathing new life into the lucrative Enterprise Content Management (ECM) market. This process is currently fueled by large organizations. With hundreds of millions of potential customers using Web 2.0 services and applications on a daily basis, these organizations are desperately seeking new ideas that may allow them to “monetize” on these developments. Huge and large firms that were once satisfied with custom-made legacy or ‘homegrown’ systems are now acutely aware of the risk that they might miss out on opportunities created by the Web 2.0 explosion if they don’t act now. Their actions are leading to an influx of revenue into commercial software that is more adept at leveraging Web 2.0 capabilities.

As of today, however, there is a stark disparity between the growing desire of these organizations to integrate new web technologies to enhance their business processes and cut in IM expenses, and the ability of vendors to supply integrated solutions that meet their needs and expectations.

The following short paper will examine this growing market and the main shortcomings that currently prevent it from achieving its full potential.

Introduction

Although still at its very early stages, the infiltration of the new internet technologies (Web 2.0) into the business world is a fact. In the past two years the demand for web-based business solutions has been on the rise, and is expected to increase.

Under the relatively new area dubbed ‘Enterprise 2.0′, the new internet technologies (Web 2.0), and especially the concepts surrounding social networking and user-generated content, are breathing new life into the lucrative Enterprise Content Management (ECM) market. This process is currently fueled by large organizations. With hundreds of millions of potential customers using Web 2.0 services and applications on a daily basis, these organizations are desperately seeking new ideas that may allow them to “monetize” on these developments. Huge and large firms that were once satisfied with custom-made legacy or ‘homegrown’ systems are now acutely aware of the risk that they might miss out on opportunities created by the Web 2.0 explosion if they don’t act now. Their actions are leading to an influx of revenue into commercial software that is more adept at leveraging Web 2.0 capabilities.

As of today, however, there is a stark disparity between the growing desire of these organizations to integrate new web technologies to enhance their business processes and cut in IM expenses, and the ability of vendors to supply integrated solutions that meet their needs and expectations.

The market push factors

The growing interest of the business sector in the new internet technologies is the result of a culmination of several ongoing processes:

• The change in the nature of the work environment – a growing number of people work outside the traditional office environment. For these home-based workers and telecommuters the PC, laptop, Smartphone and web services are the main tools of their trade.
• The gradual shift to web-based work environments – cloud computing is the future (perhaps the most pertinent indicator of this is the fact that Microsoft’s Office 2010 suite will also become available as a cloud-based service).
• A generation shift – the paper/desktop generation out, the web generation in.
• A growing focus on improving business performance by encouraging collaboration.
• The desire of organizations to capitalize on their existing web presence by using new Web 2.0 concepts such as social networking, microblogging, RSS, mashups, etc.

The market main failure points

Currently, there is a stark disparity between the growing desire of organizations to integrate new web technologies to enhance their business processes and cut in IM expenses, and the ability of vendors to supply integrated solutions that meet their needs and expectations. Most web-based business solutions offered today are simply enterprise level versions of existing Web 2.0 applications, such as web-page builders (WCM), social networking, wikis, microblogs, RSS, chat-rooms, mash-ups, etc. Fearing to be left behind, many large organizations opt to try these often untested solutions, thus driving the current demand. However, it is increasingly becoming apparent that such solutions are difficult to align with existing business practices and organizational culture.

This reality suggests that the current Enterprise 2.0 offerings fail to provide viable solutions to the market needs. This supposition is supported by the fact that in a market that is potentially worth many billions of dollars, the market leaders only manage to turn 20-40 million USD each in gross revenues at the most.

The Enterprise 2.0 Market

Enterprise 2.0 is a real market with real customers and real issues that warrant innovative technological solutions. Enterprise 2.0 may be defined as the use of cloud computing technologies and Web 2.0 concepts for use in two organizational fronts:

• The Internal – the use of cloud computing and Web 2.0 concepts to provide savings on infrastructure costs, offer new web-based business process solutions, and improve internal communication.
• The External – the use of Web 2.0 tools and applications to extend reach into the huge pool of potential customers now using Web 2.0 services, such as social networks, user-generated content sites, and media streaming sites.

Market Overview

As Enterprise 2.0 offerings strive to target two major organizational concerns – improving internal communication and reaching new markets – many large organizations perceive the adoption of such offerings as part of their long-term strategic corporate strategy. According to Forrester Research the spending on enterprise Web 2.0 technologies is going to increase dramatically over the next five years, reaching a global enterprise market of $4.6 billion USD by the year 2013. The top spending categories are: Internal social networking tools, Blogs and wikis, and Mashups. Forrester predicts that by 2013 spending in the external domain will surpass those in the internal domain by a billion USD.[1]

In an attempt to size up this growing trend, many Global 2000’s and very large organizations have invested in access of 700 million USD in 2008 in Enterprise Web 2.0 solutions.[2] However, studies show that the current mode in which Web 2.0 technologies are implemented in organizational settings does not enable organizations to reap the full benefit from such. Such studies reveal that, as of today, there is a stark disparity between the willingness of organizations to invest in enterprise Web 2.0 technologies, and the ability of the existing vendors to supply solutions that provide real proven value.[3]

Existing approaches and their shortcomings

The current solutions in the Enterprise 2.0 market may be categorized under two main different approaches:

The ‘Enterprise Social Network software’ approach

Currently the Enterprise 2.0 market is dominated by vendors offering ‘Enterprise Social Network software’. These solutions (e.g. SocialText, Jive Software, MindTouch, etc.) regard the future work environment as a social network made up of employees. Following the latest trends in Web 2.0 user experience, the basic model followed by these platforms is Facebook and Twitter. Their basic reference point is the organization as a social unit.

According to this approach the new internet technologies should be harnessed to transform the workplace into a vast egalitarian network of knowledge workers who may freely communicate with each other, regardless of hierarchies and/or departmental boundaries, in any way possible. Although it is unclear what might be the value of such an approach, they nonetheless compete amongst themselves on who will succeed in implementing more web-based communication applications into the limited space of a computer screen.

Shortcomings of the internal social networking approach

The social networking in the workplace approach has several major shortcomings that are the main cause for the current market failure:

• Limited target market – since networking is their main concern, they mostly target large companies that have enough employees to make the establishment of an internal social network worthwhile. They offer no value whatsoever to tiny and small businesses which comprise the majority of businesses in all western economies.
• Limited internal focus – they provide a solution almost solely targeting the internal aspects of the work environment, while offering only limited solutions to the external ones. In doing so, a major strong point of Web 2.0 concepts for the benefit of business processes is lost.
• Questionable value – The value of introducing Social Media into the internal organizational front is highly controversial, and there are no credible surveys that prove the viability and real value of such an approach. Dennis Howlett of ZDNet, for instance, put it this way:

“Like it or not, large enterprises – the big name brands – have to work in structures and hierarchies that most E2.0 mavens ridicule but can’t come up with alternatives that make any sort of corporate sense. Therein lies the Big Lie. Enterprise 2.0 pre-supposes that you can upend hierarchies for the benefit of all. Yet none of that thinking has a credible use case you can generalize back to business types – except: knowledge based businesses such as legal, accounting, architects etc. Even then – where are the use cases? I’d like to know.”[4]

The main point of criticism against the implementation of social media in the workplace is that social networks, microblogging, chat rooms, rss feeds, mashups, social games, and other recreational Web 2.0 concepts are oxymoronic to a normal, effective work environment. They are segments of the current Web 2.0 experience which is wholly recreational, externally oriented, and is geared toward breaking hierarchies, dispersing effort, time and interests and diffusing concentration.

The Wiki approach

These solutions (PBworks, Huddle, Telligent, etc.) contend that the main focal point in any work environment, currently or in the future, will remain the individual worker. They strive to harness cloud computing and Web 2.0 concepts to offer this worker new and improved ways to conduct his/her work individually or in collaboration with others on the web. Their model is Wiki software that allows an individual to author and publish content and grant others permission to view and/or edit it as well. They compete with each other mainly on making the rather cumbersome and tech intensive basic Wiki software into a more easy to use and intuitive software.

Shortcomings of the Wiki approach

Unlike the Social media oriented solutions, the wiki oriented ones target all types of organizations from self-operated home businesses to huge cooperations. However, they also have several major shortcomings:

• Thin technological basis – their main weakness is that the basic wiki concept on which they lean is very thin and fails to take full advantage of newer more advanced web-based content management abilities. For that reason they mostly target people with very simple and basic needs.
• Limited internal focus – even more than the social media solutions, they provide a solution almost solely to the internal aspects of the work environment, while offering highly limited solutions to the external ones.

The cloud-based BPM middleware approach

A third approach that may be dubbed the cloud-based BPM middleware approach includes a limited number of vendors such as 37Signals, CentralDesktop, LessEverything, and Sosius that offer creative and useful web-based solutions to real business process problems. Nonetheless, with the exception of a few players such as HubSpot, the solutions offered in this category are mainly intended to expedite internal work processes.

Common shortcoming

All three approaches as described above also share an additional shortcoming – they all use of linear hierarchies. In such linear hierarchies objects and pages on a website are linearly interlinked to each other resulting in limited usability and obliging users to navigate through multiple screens.

Summary

To sum up, the current Enterprise 2.0 market is occupied by either socially minded solutions of questionable value, thin wiki-based solutions, or internally oriented innovative solutions. All three types of solutions are focused mainly on the internal aspects of the work environment. Almost all current vendors in this market disregard almost completely the growing demand for innovative web-based solutions that will succeed in combining sound internal individual and group work tools with Web 2.0 empowered external tools.

Currently, the Enterprise 2.0 market can be described as a classic situation where the tail – recreational Web 2.0 applications and concepts – is wagging the dog – the enterprise. In this respect the implementation of Web 2.0 and cloud computing concepts on the enterprise level may be equated to the Chinese invention of gunpowder – initially used to ignite fireworks for festivities and recreation, but later harnessed to advance tangible political and strategic ends. Right now Enterprise 2.0 is all fireworks. However, the potential to become a major strategic element in the way business is conducted exits and is yet to be even remotely exploited.

[2] Perez, “Enterprise 2.0 To Become a $4.6 Billion Industry By 2013″.

[3] See, for example: Jakob Nielsen, “Social Networking on Intranets”, http://www.useit.com/alertbox/social-intranet-features.html; Gartner, “Magic Quadrant for Social Software in the Workplace”, revised edition 24 November 2009, pp. 1-2 (for an online full text version, see: http://www.gartner.com/technology/media-products/reprints/microsoft/vol10/article4/article4.html; See also: T.D. Wilson, “The nonsense of ‘knowledge management’”, http://informationr.net/ir/8-1/paper144.html; Susan Scrupski, “State of the Enterprise Market: Slow and Unsteady”, http://www.readwriteweb.com/enterprise/2009/04/state-of-enterprise-market.php

[4] See: Dennis Howlett, “Enterprise 2.0: what a crock”, http://www.zdnet.com/blog/howlett/enterprise-20-what-a-crock/1228