Enterprise Software is Dead! Long Live… Thingamy?
Peter Merholz observes that enterprise software is being eaten away from below, by applications such as Moveable Type, and innovators such as SocialText.
“These smaller point solutions, systems that actually address the challenges that people face (instead of simply creating more problems of their own, problems that require hiring service staff from the software developers), these solutions are going to spread throughout organizations and supplant enterprise software the same way that PCs supplanted mainframes.
I sure wouldn’t want to be working in enterprise software right now. Sure, it’s a massive industry, and it will take a long time to die, but the progression is clear, and, frankly, inevitable.”
Indeed it is. Though there’s considerable analyst hoopla about rising enterprise content management or ECM spending and IT investment (see also In Focus: Content Management Heats Up, Imaging Shifts Toward SMBs), we’re in the midst of a larger and longer term cycle of evolution in which cheaper, faster, more agile competitors to established market leaders are following the classic market entry strategy of attacking the bottom of the pyramid. (The pyramid is a hierarchical representation of a given market or set of products; at the top of the pyramid sit the more expensive and mature products which offer more features, capabilities, quality, or complexity; the lower levels of the pyramid include lower cost products which offer fewer features.)
What’s most interesting about the way this pattern is playing out in the arena of enterprise content management solutions is that the new competitors were not at first attacking from the bottom as a deliberate strategy, think of MoveableType, but they have quite quickly moved to this approach as with the recent release of Alfresco. The different origins of Sixapart and Alfresco may have some bearing on their different market entry approaches: Sixapart was a personal publishing platform that’s grown into a content management tool, whereas Alfresco’s intented audience was enterprise customers from day one. I’d wager the founders of Alfresco looked to RedHat as an example of a business model built on OpenSource software, and saw opportunity in the enterprise content management space, especially concerning user experience annd usability weaknesses in ECM platforms.
There’s an easy (if general) parallel in the automotive industry: from American dominance of the domestic U.S. market for automobiles in the post-WWII decades, successive waves of competitors moved into the U.S. automobile market from the bottom of the pyramid, offering less expensive or higher quality automobiles with the same or similar features. The major Japanese firms such as Honda, Toyota, and Nissan were first, followed by Korean firms such as Hyundai and Daewoo. It’s plain that some of the older companies sitting at the top of the pyramid are in fact dying, both literally and figuratively: GM is financially crippled and faces onerous financial burdens — to the point of bankruptcy – as it attempts to pay for the healthcare of it’s own aging (dying) workforce.
So what’s in the future?
For auto makers it’s possible that Chinese or South American manufacturers will be next to enter the domestic U.S. market, using similar attacks at the bottom of the pyramid.
For enterprise software, I think organizations will turn away from monolithic and expensive systems with terrible user experiences — and correspondingly low levels of satisfaction, quality, and efficacy — as the best means of meeting business needs, and shift to a mixed palette of semantically integrated capabilities or services delivered via the Internet. These capabilities will originate from diverse vendors or providers, and expose customized sets of functionality and information specific to the individual enterprise. Staff will access and encounter these capabilities via a multiplicity of channels and user experiences; dashboard or portal style aggregators, RIA rich internet applications, mobile devices, interfaces for RSS and other micro-content formats.
David Weinberger thinks it will be small pieces loosely joined together. A group of entrepreneurs thinks it might look something like what Thingamy claims to be.
Regardless, it’s surely no coincidence that I find a blog post on market pyramids and entry strategies put up by someone working at an enterprise software startup…
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