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    Enterprise Social Software Headed for Consolidation Cycle During Recession

    Written by

    Clint Boulton
    Published December 16, 2008
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      Startups in the social collaboration software market are facing the combination of a maturing market ripe for consolidation and a bear market, where larger enterprise vendors may look to bargain-shop and cherry-pick the best-of-breed providers.
      Gartner analyst Matt Cain said in a new report that providers of blog, RSS, wiki and other newfangled collaboration technologies may have it tougher than others because of where they are in their maturation cycles.
      There are literally hundreds of vendors in this space, from giants like IBM to smaller startups such as Jive Software, NewsGator, Socialtext, MindTouch, Yammer and Awareness. Cain predicted that more than 60 percent of the current social software vendors will exit the market through acquisition or failure by 2012.
      While spending on social software suites to build communities is becoming the modus operandi for enterprises, Cain said he expects 2009 through 2011 to be marked by technology and vendor consolidation.
      Large enterprise-focused software vendors, such as Microsoft, Oracle and SAP, are now eyeing enterprise social software players whose products they can use to fill gaps in their portfolios. Cain wrote in a report:

      “This is no different from any market maturation cycle, where in the early stages of new technology, there’s still quite a bit of differences between feature sets and no particular vendor is able to capture 15 to 20 percent of the market and so you have this tremendous flowering of companies that’s being [given] copious VC money. We’ve all seen this movie before and so we fast forward a couple of years and the vast majority of seedlings has been plowed under or they’ve gone into a new line of business or been acquired. Very, very few of those guys are remaining as stand-alone entities. “

      However, Cain admitted in an interview with eWEEK that the 60 percent figure for social software consolidation or exit is “light” because it doesn’t factor in the current recession. The economy is in an unpredictable funk, and startups are falling like lifeless trees, their employees scattered like leaves to other, more solid concerns.
      Cain chose to stick with his 60 percent number, but allowed that the recession could significantly ratchet up the percentage of companies that deal, fold or start a new game.

      Social Software to See Only 30% Adoption in Enterprises

      In fact, the number of social collaboration vendors could dwindle significantly if history is any indication. Cain, who was covering CRM companies when the dot-com bubble burst in 2000, said scores of such vendors went under or were sold at bargain basement prices.
      Many people refuse to compare the current recession to the dot-com crash, arguing that those companies were paying hundreds of thousands of dollars for infrastructure at the time. Today’s Web 2.0 startups have found ways around this, paying a fraction of what companies used to pay by using the Internet as their delivery mechanisms. This requires fewer servers and less storage gear.
      Today, customers that can afford social software in 2009 and beyond should be in the driver’s seat, as larger vendors such as IBM, Microsoft and Oracle strive to buy up new technologies, insert them in their portfolios and deliver more solid suites.
      Cain said to look to incumbent messaging and collaboration providers IBM and Microsoft to set the pace in social software, with Cisco Systems, Google and others chiming in. Cain noted:

      “At some point, there will be a saturation of features, where what Microsoft delivers is good enough to meet 85 percent of requirements and that hurts smaller vendors that long had that best-of-breed, feature-rich product. At some point the massive wave of innovation around social software starts to ebb and Microsoft and IBM are able to deliver something that is perfectly suitable for most folks.“

      Gartner believes more than 30 percent of large enterprises will deploy blogs, RSS, wikis and other tools to all their employees. This estimation, like the 60 percent figure of vendors exiting the social collaboration space by 2012, seems low.
      But Gartner believes the lack of clarity about business benefits and fears over the negative implications of losing control over people and content will impede deployments.
      Some companies are happy with what they currently have, while others will be impeded by stricter enterprise requirements, including security issues and concerns about integration with existing systems.
      Cain noted that employees in many businesses are already using enterprise social software tools unbeknownst to their IT departments.

      “How do you define what a corporate deployment is if it’s creeping in at the grassroots level? If we were to include that figure in the number, it would double.”

      Clint Boulton
      Clint Boulton

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