Business Accent

Enterprise Web 2.0 will see surging demand and excitement

2008 will see the enterprise Web 2.0 market gain importance writes G Oliver Young

G Oliver Young

The enterprise Web 2.0 market, which includes the deployment of tools like blogs, wikis, and social networking within the enterprise, was a growing force in enterprise software in 2007. While the market is still quite immature, it will continue to gain importance in 2008 as an increasing number of firms look to enterprise Web 2.0 tools to solve long-standing information worker problems. As a result, Forrester expects to see strong demand growth for tools like enterprise RSS and social networking, an increased role for IT departments in technology acquisition, and steadily growing revenue from current deployments. The market will remain volatile, but Forrester expects mid-tier software vendors, consultancies and systems integrators, and Microsoft to reap the biggest rewards in the coming year.

Web 2.0 stepped into the collaboration and productivity market with a bang in 2007, capturing much of the attention of information and knowledge management professionals and helping to push the boundaries of the Information Workplace. Referring to the deployment of tools like blogs, wikis, RSS, mashups, and social networking for corporations, enterprise Web 2.0 is now delivering substantial business value around collaboration and productivity and has reached the 2008 priority list for many enterprises.

Today, enterprise Web 2.0 technologies are only beginning to be widely adopted. But in 2008, Forrester expects to see strong growth as adoption of Web 2.0 tools in general continues to spread. Looking ahead, Forrester predicts that:

IT departments will take their heads out of the sand and embrace Web 2.0 technologies. To date, most IT departments have resisted Web 2.0 tools, often viewing them as consumer grade - of secondary concern to other major IT investments - or simply frivolous. But in 2008, Forrester expects at least half of the 42% of enterprises that say Web 2.0 is not on their priority list to add it by year’s end. Why?

First, the IT shops that began experimenting with enterprise Web 2.0 tools for their own use in 2007—for tasks like help desk ticket resolution, standards and documentation tracking, and IT project management—will begin rolling out these tools more broadly to lines of business as they pass IT muster. Second, CIOs will concede that they cannot quell passionate employees’ use of consumer-oriented or SaaS Web 2.0 tools and will mitigate risk by deploying enterprise-class tools in their stead. Finally, for IT departments aspiring to be more relevant to the business, enterprise Web 2.0 tools will be a high-impact, low-cost method to show leadership and innovation. Tech strategists should focus feature development on IT in 2008 and keep a sharp eye on integration and deployment. For many vendors, this means offering the previously unthinkable: on-premise software.

Trial deployments in 2007 will deepen in 2008. Forrester has seen the adoption of enterprise Web 2.0 tools consistently follow a tried-and-true pattern: technology investigation, experimentation, rollout to small groups or teams, and finally widespread adoption. The vast majority of deployments followed this pattern in 2007, but as of yet very few have hit the point of pan-enterprise adoption. While we don’t expect every deployment to balloon to its full potential in 2008, we expect that enough will grow to provide solid revenue growth within existing installed bases.

RSS demand will grow substantially. In 2007, interest in the RSS “publish and subscribe” architecture grew as firms sought to syndicate internal content such as RFP requests, blog postings, wiki changes, and CRM data. While this demand growth was enough to keep RSS vendors like KnowNow and NewsGator Technologies busy, Forrester expects 2008 to be a banner year for RSS and specifically enterprise RSS. Why the optimism? In 2007, many firms discovered the value of blogs and wikis for knowledge workers, and a healthy number of firms made initial investments. However, for these tools to truly fulfill their potential, an RSS deployment becomes a must-have, otherwise new content goes unnoticed and most blogs and wikis will fall out of daily view of their users. As an RSS technology strategist, you must pursue tight partnerships with as many blog and wiki vendors as possible.

Each vendor adds value to your existing deployments by sending you qualified prospects. While 9% of enterprise firms expect to consider the use of RSS in 2008, we believe that number will be close to 20% by year-end.

Mashups will mature and eat into other major markets. Of all the enterprise Web 2.0 product categories, the mashup market saw the most innovation in 2007; IBM, Microsoft, and Serena Software all made major forays into the market. Forrester expects such innovation to bear fruit in 2008 as the market coalesces around a more cohesive set of business processes, value propositions, and usage metaphors. Enterprise mashups will move from a few one-off pilots to true enterprise-class software in the coming 12 months. That said, there will be no shortage of volatility on the supply side as mashups begin to take large bites out of the RSS, portal, search, and enterprise application integration (EAI) markets. So who wins those dollars? The vendors that can exert the most influence on standards boards and industry groups will push advantageous standards—such as the OAuth mashup authentication standard—and the vendors that can best articulate mashup value to the public will set market expectations.

Major acquisitions and market exits will experience a drought. In the long run—three years out—the enterprise Web 2.0 market will not have the carrying capacity to keep all of today’s active vendors thriving, but very few will cash out in 2008. Expect major acquirers—namely IBM, Microsoft, Oracle, and SAP—to keep growth as organic as they have to date. Overall, Forrester does not expect any major acquisitions. Tech strategists should look to larger vendors as partners and distributors rather than exit strategies. That said, there are several major wildcards that could knock this market off its tenuous equilibrium. Google and Salesforce.com could easily spark a run for Web 2.0 SaaS vendors with one or two smaller acquisitions, and a major acquisition of a leading startup vendor—such as Microsoft buying NewsGator—has the potential to result in the kind of vendor rollup that the BI market saw in 2007.

Social networking will eat up much of the limelight. Consumer social networking—and specifically Facebook—was the Web 2.0 story of the year in 2007, and the spillover into enterprise Web 2.0 has already begun. Forrester is getting inquiries on how firms should approach social networking, both to lock it out and to embrace it for employees. Expect the adoption of social networking solutions for business to accelerate dramatically in 2008 with many firms looking for internal social networking solutions. Suite offerings that include social networking like Awareness, Jive Software, and IBM’s Lotus Connections offering stand to benefit greatly from the attention, but nearly any vendor that uses the term “social networking” will get at least some consideration.

More mid-tier vendors will enter the space, capturing the spend. Vendors will to continue to pour into the enterprise Web 2.0 space in 2008. But unlike the first wave, very few entrants will be small or startup vendors. Instead larger, established vendors in adjacent markets will offer Web 2.0 features and functionality en masse—just as Web content management vendor FatWire Software has done with its TeamUp product. Others will pivot outright to capture enterprise Web 2.0 dollars—as software configuration tools management vendor Serena Software has done with its business mashup product. Mashups in particular will draw in vendors from the search, portal, and EAI markets. In general, 2008 will see the entry of many mid-level software firms with niche offerings and specialized services fragmenting the market and intensifying competition. The real winners here will be those firms entering the enterprise Web 2.0 market—they can augment current offerings with simple Web 2.0 features—while existing Web 2.0 vendors, particularly pure-play vendors, will lose as they are forced to compete with a larger pool of competitors and in niche markets.

Consultants and systems integrators will conduct a strong build out of capabilities. Forrester expects a growing group of consultants and systems integrators to follow behind the leading edge of the enterprise Web 2.0 market. In 2008, look for services vendors to come to market with strong offerings for companies adopting enterprise Web 2.0 tools and processes. Unlike many business technology markets, Forrester expects far greater demand for process engineering and change management services than for systems integration because many of the early adopters have reported much more difficultly with cultural change and adoption than with technology integration and optimization. Look for services vendors like Accenture, Capgemini, Deloitte Development, and IBM Global Services to capture much of this nascent services market.

The author is an Analyst, Forrester Research. He can be contacted at oyoung@forrester.com