Enterprise Web 2.0 Spending to Reach $4.6 Billion

 
 
By Darryl K. Taft  |  Posted 2008-04-22
 
 
 

Enterprise Web 2.0 Spending to Reach $4.6 Billion


On the eve of the Web 2.0 Expo in San Francisco, Forrester Research released a report stating that enterprise spending on Web 2.0 technologies will continue to rise over the next five years, growing 43 percent each year to reach $4.6 billion globally by 2013.

The five-year forecast from Forrester, released April 21, features a breakdown of future business spending on technologies such as social networking, RSS, blogs, wikis, mashups, podcasting and widgets, as well as an analysis of enterprise Web 2.0 spending across North America, Europe and Asia Pacific. The report forecasts that enterprise spending on Web 2.0 technology will "get hot" in Europe and the Asia Pacific region in 2009.

The report notes that large businesses, including General Motors, McDonald's, Northwestern Mutual Life Insurance and Wells Fargo, all use Web 2.0 tools extensively and that 56 percent of North American and European enterprises say Web 2.0 will be a priority this year.

"Software firms can make money selling enterprise Web 2.0 software, but it will not be an easy road to hundred-million-dollar run rates," Forrester analyst G. Oliver Young, the lead author of the report, said in a statement. "The market for enterprise Web 2.0 tools will be defined by commoditization, eroding prices, and incorporation into enterprise collaboration software over the next five years. It will eventually disappear into the fabric of the enterprise, despite the major effects the technology will have on how businesses market their products and optimize their workforces."

The report indicates that the current enterprise Web 2.0 market is small but growing. The spending by enterprises-those companies with 1,000 or more employees-will reach $764 million in 2008, but grow quickly over the next five years, representing an additional $3.8 billion in spending.

Social Networking Tops the List


 

Social networking will remain the top-spending category over the five-year period, the report said.

"In 2008, firms will spend $258 million on social networking tools like those from Awareness, Communispace and Jive Software, easily topping the next-largest category of spending, RSS, and experiencing the strongest annual growth rate over the next five years," the Forrester report said. "Open-source offerings, such as Drupal for social networking, are making inroads across the board, but more significantly limit the revenue opportunity for blogs and wikis. After blogs and wikis, mashup technology takes off next, growing from a small base of $39 million in 2007 to $682 million in 2013-second only to social networking."

However, the Forrester report said that "business buyers want Web 2.0 but depend on IT to make it happen." That observation is somewhat different from the message of some Web 2.0 technology vendors that are pushing mashup solutions as a way for business users to augment or even circumvent IT and build their own applications.

Currently, large businesses are spending more on employee collaboration tools than customer-facing Web 2.0 technologies, but Forrester expects that trend to reverse by next year. By 2013, investment in customer-facing Web 2.0 technology will outstrip spending on internal collaboration software by nearly a billion dollars.

The Forrester report also points out that a key question for software companies is, Who "pays" for Web 2.0 in the enterprise? "Three challenges face vendors: IT shops are wary of what they perceive as insecure, consumer-grade technology; ad-supported Web 2.0 tools on the consumer side have set 'free' as a starting point; and Web 2.0 technologies enter a crowded space dominated by legacy software investments," the report said.


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