This week represents an important inflection point for the Enterprise 2.0 market, a set of software vendors that sell social networking technologies to businesses. Analysts say the number of competitors will consolidate in the coming year as Microsoft captures greater market share. The start-ups that will survive must carve out a longterm place for themselves by building applications that are far more innovative and cheaper than those of the incumbent software giant. In addition, they must convince businesses that Microsoft SharePoint's "good enough" strategy is not, in fact, good enough for today's enterprise collaboration needs
As Enterprise 2.0 vendors convene for their annual industry conference here in Boston this week, many continue to fight the complacency of businesses who prefer to use Microsoft as a default choice for all their enterprise collaboration needs. SharePoint, an application that started as a document management system to store (among other items) Microsoft Office files, has since added social features, including profiles, blogs, and wikis.
Although Microsoft's smaller, more nimble competitors have built more sophisticated social networking applications for businesses, analysts say SharePoint has been "good enough" for many companies.
"Microsoft is turning social collaboration into a commodity pretty quickly," says Oliver Young, a senior analyst at Forrester who follows the Enterprise 2.0 market. "Social collaboration through an app like SharePoint is a given, since so many companies already have SharePoint. They can leverage social features at no or very little extra cost."
In addition, industry experts predict the quality of the social applications in SharePoint will improve drastically next year when the vendor releases SharePoint 2010. It will represent a significant upgrade to the product, which last enjoyed a major iteration nearly three years ago - an eternity in Web years, though normal for Microsoft's traditional, multi-year R&D cycles.
"From everything we know, SharePoint will get better," says Susan Scrupski, an Enterprise 2.0 and collaboration expert who pens the ITSinsider blog. "It's likely going to be more social, collaborative, and easier to use."
Young predicts SharePoint 2010 will be nothing short of a "day of reckoning" for the Enterprise 2.0 vendors, making this year's conference an important benchmark. As potential business technology buyers battle difficult budgets and examine their existing IT systems, when it comes to social software, many will decide between SharePoint or a cheaper alternative - and, in some cases, a bit of both.
Dancing with SharePoint: Damned if you do, damned if you don't
The Enterprise 2.0 market poses a tricky dynamic. For the start-ups who sell social software, they must not only compete for business with Microsoft SharePoint, but also build out their products to complement it. Because the SharePoint server is utilized by more than 17,000 organizations, and caters to 100 million users, its brute market strength cannot be ignored. Thus, top Enterprise 2.0 vendors such as Socialtext, Jive Software, Newsgator and Atlassian have built their social applications to play nicely with SharePoint. The thinking: a company might use SharePoint to manage their documents as in years past, but use one of the Enterprise 2.0 vendors' apps for social collaboration.
"These vendors have to dance with the elephant," says Rob Koplowitz, a Forrester analyst. "Over time, they want to be your social networking and social computing vendor, but at the same time, they partner with Microsoft to work with SharePoint."
For better or worse, many large U.S. companies have come to rely so heavily on SharePoint because it was rolled out to be a kind of glue to hold together documents and applications all over the enterprise. While SharePoint is, on one hand, an application and an accompanying server, it's also a platform on top of which companies can build custom software specific to their business. As those custom apps become entrenched in the enterprise, any social software that gets added must communicate nicely with SharePoint.
During the past year, the Enterprise 2.0 vendors have tailored their products to mirror that reality. Newsgator, for example, has had particular success embedding its Social Sites product on top of SharePoint. Social Sites allows companies to build a corporate intranet on top of SharePoint. When implemented, it behaves much like Facebook's News Feed - information about what actions an employee performs is streamed into a centralized homepage. Universal McCann, a communications and marketing firm, used Social Sites (with SharePoint) on its intranet.
But as the feature set for SharePoint improves in 2010, customers say it will be a harder choice to buy from the Enterprise 2.0 vendors. Customers whom we spoke to just before the Enterprise 2.0 conference say they could go either way, depending on how much the Microsoft app actually improves.
"If SharePoint has what I need, and I have lots of freedom to configure, that would certainly be attractive, but there is no limit to the number of use cases out there," says Jason Harrison, senior vice president and director of digital solutions for Mediabrands (the parent entity of Universal McCann). "We paired Newsgator with SharePoint originally because of RSS and content syndication this time around. I'm sure there will be a whole raft of [new] capabilities out there the next time around."
Race to Out-Innovate Microsoft is On
Enterprise 2.0 and social software start-ups have thrived in large part because they have been so much more innovative than Microsoft - an advantage they say will continue during the coming years. These Enterprise 2.0 vendors have succeeded by observing what's occurring on the consumer Web, and then making it palatable for business use. According to Enterprise 2.0 vendors, they catch enterprises up to those innovations faster than Microsoft.
"The features Microsoft comes out with in 2010 are the features that were in-demand in 2007 and 2008," says Dan Short, director of product marketing at the Portland, Oregon-based Jive Software. "The pace at which things are evolving in the consumer space is very fast. We [Jive] can have an increasingly deep integration with SharePoint, but we believe the social nature of interactions and the speed at which technology is evolving to meet those will outpace SharePoint [and its social features]."
Socialtext started in 2001, specializing in enterprise wiki technology. It has employed a similar innovation strategy to keep ahead of Redmond. Over time, Socialtext followed the consumer market and developed new social features on top of its product. It added social networking profiles that allowed companies to build their corporate intranet with a Facebook-like design. Most recently, it launched Socialtext Signals, a technology that creates an internal Twitter-like experience for the enterprise, where employees share their actions with colleagues.
"It takes Microsoft a long time to deliver software to the market," says Ross Mayfield, Socialtext's president and chairman. "A year ago, the idea of having micro-blogging and activity streams for the enterprise was a new concept. Well, that's around the time they probably froze the spec for SharePoint 2010. Overnight, the demand for social software changed, and it will change again."
When enterprise demand changes, Mayfield says that he and many of his contemporaries can adapt much faster than Microsoft. In addition, he claims the cost of implementing his software for internal collaboration comes to a tenth of the price of SharePoint's roll-out cost, a factor he believes many customers will respond to given the difficult economy.
Microsoft Plays The Old Stability Card
But cost and innovation aren't the only characteristics businesses, especially large ones, look for in their software, says Michael Sampson, a collaboration expert who has written a book on SharePoint. Other issues that customers consider include vendor stability, partner ecosystems and appetite for risk as it concerns new technologies.
"Companies want to know of the other vendors, 'how long have they been around?' And 'how long can they go forward?'" Sampson says. "Microsoft will be here forever and a day, so they win in that criteria."
Microsoft has also nurtured hundreds of thousands of mom and pop support shops that have made it their business to implement SharePoint. For the Enterprise 2.0 vendors, this makes it hard to compete. They can focus on implementing their start-up wares for some of their bigger customers, but many smaller companies will be forced to go it alone.
"It's one thing to say I have this great tool, but it's another look through a phone book and find someone who has experience implementing it," Sampson says. "Microsoft and IBM will both win on that criteria as well. They've had historical success with clients. They've got examples. The Enterprise 2.0 vendors have to find the renegades who are willing to take risks."
Microsoft's Achilles Heel? SaaS Capability
More broadly, the market for buying software of all kinds, not just collaboration packages, stands at an interesting crossroads today because of the ailing economy. When it comes to choosing between SharePoint and a newer vendor, customers can go either way, says Stowe Boyd, an expert in social technologies who conducted this year's Open Enterprise Study, the results of which will be unveiled this week at the conference.
"Some companies say, at the big downturn, that we're not going to do anything and we'll make do with what we've got," Boyd says. "So if they have SharePoint, they're not going to build something new. Other companies say, because we need to reevaluate everything we're doing, it might be that the way we've been spending money on these technologies just doesn't make sense. Maybe we should try something new."
Boyd also says that enterprises are moving away from a document-centric world - which SharePoint largely remains a conduit for in the enterprise. Rather than constantly spend your entire day in a Microsoft Word file or Outlook e-mail, you might collaborate trading short messages in real-time with streaming technologies, like a Twitter for the enterprise.
Software delivery models may matter significantly as well. As companies try to contain costs, they will increasingly buy applications in a software as a service (SaaS) model instead of hosting them in-house. While Microsoft has launched a SaaS version of SharePoint, it lacks many of the features of its older, on-premise brother. Most of the Enterprise 2.0 vendors offer fully-featured SaaS products.
"Apps that are natively SaaS will have a natural advantage for that delivery mechanism," Mayfield says. "We've developed a way to deliver it on the cloud that works for enterprises."
C.G. Lynch writes about consumer and social technologies, and tracks their migration into the workplace. You can follow him on Twitter: @cglynch.