Most Enterprise Software Vendors Fail To Deliver Innovation

Despite hundreds of billions wasted on failed research and development projects, most market influencers would agree that enterprise software vendors have produced a dearth of innovation over the past decade.  Vendors often cite UI re-skins, major functionality additions, integration of acquisitions, technology re-platforms, and weak attempts at faking cloud computing as innovations.  In fact, let’s call it what it is.  Only a handful of enterprise software vendors have truly innovated.   Many enterprise software vendors are fast followers.  Most are innovation laggards living off fat maintenance revenue streams.  Ask any product strategist where they gain their inspiration and they will all cite advancements in consumer technology; and not peer enterprise competitors.

Innovative Enterprises Push Forward Mostly On Their Own

During this year’s Information Week 500 event, conversations with over 50 leading business technology leaders highlighted the growing gap in innovation.  These next gen leaders demonstrated how they were turning to consumer tech advancements to influence their custom development efforts; and/or seeking emerging vendors with innovative offerings.

For example, Bill Martin, the CIO of Royal Caribbean showed how design thinking coupled with real-time analytics and on-board mobility could improve the cruise experience on the largest ship ever built.  Shawn Kleim, Director of Development at WetSeal, provided proof points on mobility and social convergence in driving retail sales and eCommerce in the highly competitive teen apparel market.  Dave Bent, Senior VP of eBusiness services and CIO of United Stationers, proved how a company could deliver cloud services to partners and create competitive advantage across a value chain.

A number of CIO’s showcased how they were taking advantage of the cloud with SaaS apps and private clouds. Others discussed their efforts to optimize costs using third party maintenance to pay for innovation.  The common lessons learned – most did not expect to gain market advantage from their existing and legacy vendors.  Innovations came from the consumer tech side and next generation solution providers.  Consumer tech advancements influenced business driven technology advancements.

Software And Tech Vendors Rush To Incorporate The Five Pillars Of Consumer Tech

Ten elements drive key design points for next generation apps.  These design points showcase how advancements in consumer tech now permeate the enterprise.  Design thinking concepts drive dynamic user experiences, business process focus, and community connectedness.  Based on existing research, deep dives into major vendor road maps, and validation with clients, five pillars of consumer tech have emerged as the foundation for future inspiration in the enterprise (see Figure 1):

Figure 1.  Five Pillars Of Consumer Tech Will Influence Enterprise Software Throughout The Next Decade

  • Mobile. Mobile devices reflect the shift to ubiquitous computing.  Users want anytime, anywhere access.  Smart phones will provide the key gateway for consumer users to enter the enterprise.  For instance, IDC numbers show mobile smart phone penetration to grow 24.5% by 2011.  Most of the enterprise adoption trends comes from consumer driven demand.  For example, Apple iPhone applications hit 1 billion downloads in the first 9 months and a significant number of enterprises have adopted the iPhone in addition to Blackberry.  Google Android adoption is projected to grow 51.2% from 2010 to 2014 despite the fact that most enterprises have no plans yet to support this platform.  In the next 12 to 18 months, users expect mobile access to enterprise information on their terms, not the enterprises.  In 18 to 24 months, the convergence of location based services and mobility will move from consumer tech to the enterprise.  These augmented reality scenarios will power enterprise proactive field service and new digital and social marketing advancements.  Once again, consumer preferences will drive enterprise usage.
  • Social. The culture has shifted.  Consumers no longer trust the organizations they work with to provide accurate and timely information.  As social networks replace companies as the first source and most trusted source of information, users will expect advancements such as collaboration, social networking, community platforms, and activity streams to enter the enterprise.  In fact, activity streams as popularized by Facebook now permeate every enterprise software vendor’s road maps as a key user experience paradigm.  Salesforce.com’s Chatter leads the way in evangelizing internal enterprise adoption.   Social CRM, Enterprise 2.0, and social business continue to emerge as key areas of growth that will expand reach to stakeholders such as customers, partners, and suppliers.  Advanced thinking in vendor relationship management (VRM) will permeate enterprise markets in 24 to 36 months.  Followed by Facebook, Classmates.com, Orkut, LinkedIn, Meebo, and Twitter drive most social networking activity.  Expect key social elements to emerge in the next 12 to 24 months as Social CRM, community platform, social media monitoring, and traditional CRM vendors converge in their solution offerings.  Social business software will emerge and vendors such as Attensity, Jive, Lithium, RightNow, and Salesforce.com appear to be assembling the partnerships and components to build a suite.
  • Cloud. Cloud computing plays a key role in the transformation across the stack for consumption, creation, orchestration, and infrastructure.   Mega consumer sites such as Amazon, Baidu, Craigstlist.org,  eBay, Facebook, Google, NexTag, Priceline.com, Shopping.com, Shopzilla, Target.com, Walmart.com, and Yahoo! have already proven the advantages of cloud computing.  Early SaaS pioneers Intacct, NetSuite, PlexSystems, Salesforce.com, and Workday paved the way for enterprise software innovation — blending a new deployment option, agile development, and business models.  Amazon EC2 and Rackspace have gained mindshare in cloud infrastructure.  Multi-tenancy will emerge as a key requirement despite the campaign by legacy vendors to muddle the message.  Expect enterprises to adopt virtualization and other apps optimization to improve time to market and reduce the costs of deployment.  Cloud initiatives will emerge from most vendors in the next 6 to 12 months.   Beyond the cloud, the Internet of Things will drive device to device connectivity.  Companies such as Streetline Networks, a winner of the Silicon Valley IBM SmartCamp contest, already use sensing networks, mobile technologies, and the power of the cloud to help cities and municipalities optimize parking revenue.
  • Analytics and Game Theory. Consumer tech innovations already include game theory based on scenario planning.  Ralph Koster’s book on Theory of Fun for Game Designers summarizes how analytics and game theory will move from consumer to enterprise space.  As he states, “Game mechanics are rule based systems that facilitate and encourage a user to explore and learn the properties of their possibility space through the use of feedback mechanisms.”  Facebook creates recognition and rewards for users to add people to the network.  Yelp, Foursquare, and Gowalla incentivize users with discounts, promotions, and recognition to add and review locations.  Digg creates contests to drive the latest and freshest content.  Organizations can expect these gaming mechanics to drive employee behavior to promote knowledge transfer, sales programs, and collaboration.  Buyers of organizations can expect these systems to improve revenue and stakeholder collaboration.  These systems will require a strong analytical foundation to build algorithms around prediction, trending, and suggestion.  Given the complexity in creating the right incentive structure for enterprises, most systems will not cross the chasm to the enterprise side for 36 to 48 months.  Data deluge will remain the key issue as organizations try to improve signal to noise ratio along with building the foundation for data governance and a solid MDM strategy.
  • Video and Unified Communications. Low cost and easy to produce video emerges not only as a key broadcast medium, but also an effective knowledge sharing medium.  Consumers already use YouTube to share “How to” information or broadcast ideas or opinions.  Unified communications (UC) providers such as Cisco, Citrix, Google, Microsoft, and Skype will be the first to unite chat, email, messaging telecommunications, and video into easier to use platforms.  Expect enterprises adoption to be driven by consumer adoption.  Consumer expectations in ease of use must transcend the complexity of most enterprise unified communications systems.  Ease of use and ubiquity will trump the need for open standards and enterprise functionality.  Organizations can expect UC and Video to open up new markets, but not for another 24 to 36 months.

The Bottom Line: Consumer Tech Must Follow The Four Five S’s To Gain Enterprise Class Acceptance In Enterprise and Social Business Software

Consumer tech trends in 2010 will influence enterprise software design throughout the decade.  However, these innovations often need to be built to enterprise class standards.  Many organizations will continue to build on their own until packaged alternatives become available and enterprise ready.  The Four Five S’s of enterprise class acceptance include:

  • Safe. Organizations expect these solutions to not only integrate with ease but also, not harm existing systems or jeopardize how users perform daily work and operations.
  • Secure. More than just role based security mechanisms, these solutions should pass encryption requirements, prevent data intrusion, and protect key intellectual property assets.
  • Scalable. Solutions should work in a wide range of environments, meet wide ranges of usage demands, and perform well across the globe.  Users should be able to grow demand and scale down as well as up.  Scaling up should lead to a lower cost per unit.
  • Sustainable. Consumer technologies must meet requirements for flexibility and adaptability over longer periods of time (e.g. 7 to 10 years).  Training programs, knowledge transfer mechanisms, and support communities should be readily accessible.
  • Simplicity. Software vendors should employ design thinking to build solutions based on how people want to use mobile, social, analytics, video, and cloud in an enterprise context. Enterprise software should deliver in an easy to roll out and use manner. (Credit to Christian Pantel, Workday on 10/05/2010)

Your POV.

Where do you get your inspiration for innovation?  What consumer tech inspirations would you wish to bring into the enterprise.  Did we miss any categories?  Are you working with an innovative vendor, if so, who?  You can post or send on to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.

How can we assist?

Buyers, do you need help with your apps strategy and vendor management strategy?  Trying to figure out how to infuse innovation into your tech strategy? Ready to put the expertise of over 1000 software contract negotiations to work?  Give us a call!

Please let us know if you need help with your next gen apps strategy efforts.  Here’s how we can help:

  • Providing contract negotiations and software licensing support
  • Evaluating SaaS/Cloud options
  • Assessing apps strategies (e.g. single instance, two-tier ERP, upgrade, custom dev, packaged deployments”
  • Designing innovation into end to end processes and systems
  • Comparing SaaS/Cloud integration strategies
  • Assisting with legacy ERP migration
  • Engaging in an SCRM strategy
  • Planning upgrades and migration
  • Performing vendor selection

Related resources and links

Reprints

Reprints can be purchased through the Software Insider brand.  To request official reprints in PDF format, please contact r@softwareinsider.org.

Disclosure

Although we work closely with many mega software vendors, we want you to trust us.  For the full disclosure policy please refer here.

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

RSS feed for comments on this post. — TrackBack URL