Web 2.0 – Now What?

There have been several posts chronicling the abundance of Web 2.0 clutter companies.  Rich Ziade had a great post showing the 15 minutes of fame that new Web 2.0 companies have as they circulate in the blogosphere for a week or two.

Baris had great survey of Web 2.0 companies detailing the clutter by category. Ismael has compiled a similar database of Office 2.0 companies.  Last week Brian Benzinger pointed to 50 companies online that basically serve the same function – taking notes.

Evidence of the Entrepreneur Bubble continues to accumulate.  And entrepreneurs are not the only ones chasing the future by looking in the rear view mirror.  The VC community seems to have re-discovered the social network yet again.  MySpace and Facebook have spawned a hundred clones.  I get 1-2 inquiries a week from entrepreneurs in the US, India, or China with social network proposals.  Video sharing is another meme-of-the-moment attracting attention and capital.  Imitation is breaking out everywhere. Last week that frustration caused me to reflect on what it means to have a barrier to entry.

But there is a bigger question at hand and I think it is on the collective minds of everyone who has been immersed in the torrent of Web 2.0 creativity.  Simply put, it is

Now What?

Web 2.0 is on the verge of going from Wired to Tired or so it seems.

VCs and some enterprise folks are starting to talk about Web 2.0 in the enterprise as Web 3.0 – Wikis, RSS, collaboration and knowledge management.  Others call it Enterprise 2.0.

I had breakfast with someone yesterday who is joining a very visible Web 2.0 company to become their General Manager of Enterprise solutions. Hmm…

I subscribe to the thesis of enterprises as a natural user of all this technology and have for a while.  Companies are communities. Supply chains are social networks. A customer base is a community, albeit often not interconnected, except by indirect methods like lawyers and analysts.  Shareholders are a community, often interconnected the same ways. 

Companies have known this for a while.  Recruiting has been an exercise in social networking for a long time, both on the employer side ($500 referrals) and the job seeker side (the origin of the concept of “networking”).

But the difference between collaboration in the consumer and business worlds is one of purpose.   Expression is the primary purpose is many Web 2.0 consumer sites.  It may be expression for entertainment, expression for reputation enhancement, expression for contribution to collective knowledge, or something else. 

Collaboration in a business context has a goal other than the act of collaborating itself.  We used to call these goals business processes.  Collaboration is one important component of a business process, but it is not the whole process.  Another interesting dimension of a business process is a transaction.  A transaction is the organization’s transformation of a set of initial inputs  (customer inquiry, need to hire, etc.) into an accomplished goal.  Collaboration is either loosely or tightly bound to the process.  But so are data and systems.  And that’s the other half of Web 2.0 to me – the lightweight integration methods of Web 2.0.    Together these two parts of Web 2.0 can re-engineer enterprise IT. Interesting. And the Enterprise itself.  Much more interesting.

OK Where?
Mash-ups represent a potentially powerful way to create new ad hoc Web applications out of existing enterprise data and web services.   Business intelligence applications are likely to be the first places we will see these appear for simple reporting and visualization purposes. Ultimately, they will emerge as complete business processes that mash (integrate) enterprise applications with applications in the cloud.  And SOA and Web 2.0 will fully converge.

But the Web 2.0 applications in the enterprise are not going to be the same as the consumer apps in the cloud. And this is more than just “behind the firewall” or not.  Applications are going to be more contextual to have value.  A Web 2.0 method of collaboration for product design and management of the bill of materials isn’t a tag cloud.  Nevertheless, tagging and structuring the ideas are an important part of ensuring the original design intent gets expressed in the delivered product.   A Web 2.0 method of managing a customer base as a strategic asset will encourage customers and vendors to share information and product applications, requirements, limitations, and flaws.  It will also change the conversation in unpredictable ways.  Mining and reporting will be just as important as capturing and ease of use.

Creating the enterprise context will be where most “ported” Web 2.0 applications fail in transferring to enterprise uses.  Because the processes do have a purpose in the enterprise, the applications of collaborative computing will need to reflect that context to be high value.  A wiki could be used in a product development team and a wiki used by a major account sales team.  But the real value will be in structuring the usage, content, reporting, etc., to really impact the goals of the teams. The wiki will be a feature of a larger solution.

This is one interesting Now What? impact of Web 2.0 for me.  Enterprises are the ultimate Walled Gardens.  The distinctions of customer/supplier, employer/employee, management/staff, marketing/sales/engineering, Chicago Office/London Office, IT/line of business all become less meaningful in world where information is more easily, more inexpensively, and more rapidly shared, transformed, and consumed. This will put pressure on organizations (and regulators) in a long wave of upheaval.  Enterprises that harness this fountain of real-time and granular information will have a huge competitive edge - an edge equivalent to the first uses of data warehouses and data mining.  They will find and react to opportunities the way that program traders find and react to market inefficiencies. This  may well be the new Strategic IT.  The strategic IT asset is not the software that automates the process.  The asset is the embedded knowledge of all these enterprise communities and its integration into business processes.

Most VCs today think enterprise software is dead, especially for early stage companies.  I don’t.  I think the days of the $1M sale / 18 months to deploy are long gone.  But new, capital efficient Web 2.0 methods of consumer services morphing into lightweight solutions to empower enterprise users are about to emerge.  Lessons learned in Web 2.0 are going to get monetized in new enterprise IT.  Perhaps that's What's Next.

Addendum: Tech Crunch reports today that Facebook now has corporate clients.

Comments

[Dan Cornish]

Great post! The consumer web 2.0 sites have some great ideas, they are a great sandbox to figure out what works. The big problem is that most if not all web 2.0 apps so far have not dealt with enterprise stuff such as user authentication, permissions, etc.. Our customers like walled gardens of information. They get real nervous when too much information can get out, like salary information, reviews, fees, business processes, etc.. Also TRUST in all caps is VERY important. "Who has my data?" and "is it Safe?" are usually the first two questions a business will ask before they buy a hosted app.

We are just experimenting right now building light weight simple to deploy and implement solutions. There really needs to be a few more open standards for sending data back and forth to control access to various bits of info.

The Craig's List model for enterprise software does have some merit. Lets take a $1b market and make it into a $250 million market. To accomplish this, we need to discover some new business models. Software is not the problem as I see it, it is implementation, which requires a great deal of business knowledge, not just technology knowledge.

[Geoffrey McCaleb]

I agree with Dan. Web 2.0 is like a real life research project to see what works, and what doesn't. The way I see it, the first round of these so-called next generation companies are doing all the hard r&d; the real players are the ones who will come next and capitalize on an opportunity that leverages all the good stuff.

I personally don't worry about the Enterprise. They are always at least 2-3 years behind the mainstream. Wiki's, and RSS will become the norm, but not until the impact/gains are painfully clear for all to see. Well, maybe we'll have to wait for the Jerry Taylor's of the world to retire first. ;)

[Al]

Excellent post, lots of good points I especially like the "Supply chains are social networks" quote, thats so applicable to a project we are working on at the mo.

PS I have also blogged about the SOA vs WEB 2.0 http://www.folknology.com/blog/1/1/
if you are interested.

regards
Al

[Bruce MacVarish]

Another insightful post Peter - thanks.

The question of how Web 2.0 intersects the Enterprise has really bubbled to the top recently... and was, you might remember, the focus of our conversation a few months back.

I absolutely agree that key examples of how Web 2.0 morphs to Enterprise Web 2.0 includes (i) integrating web apps within specific business processes (ii) capturing relevance and context for conversations and collaboration and finally (iii) using lightweight tools to integrate across silos.

In addition, it seems to me that successful Enterprise Web 2.0 players will continue to do more than just "re-package" existing enterprise business applications. The best will "re-define" and simplify how users get jobs done -- and as a result really start to improve personal and process productivity.

[joe]

I think the problem with enterprise sales is always the approval process (sales cycle). No matter the sales price, it still requires more effort than a consumer sale and so prices and deal size have to be higher to justify an enterprise focused buiness model in order to make the numbers work. We sell an advertising solution for small biz (basically a virtual ad agency for online ads) and even at $299 a month, with demonstrated payback in first month (and free trial), it still takes several sales calls (even if by telephone) to close the sale. There is also a lot more customer service (handholding) expected by biz customers than consumers, even at a low price point.

[sigma]

For "Now What?", mostly the answer has to be the usual one: Find a 'compelling value proposition'.

Web 2.0 does promise to be a revolution in 'media', information on many topics and in some aspects of civilization.

Web 2.0 is bringing a LOT of data, traffic, and eyeballs, and there should be some 'value' in there somewhere.

More on search combined with ad targeting is an obvious approach. Web 2.0 search brings some special problems, and it appears that so far no good solutions have been deployed. 'Page ranking' won't work, and clustering is not promising.

With so much data, it would be good to be asymptotic. Let's see: In a Hilbert space, each non-empty closed convex subset has a unique element of minimum norm; Riesz-Fisher and Bessel's inequality are nicely suggestive of an asymptotic direction; and for another asymptotic direction there should be plenty of data for the SLLN. The volume of data should get around the 'sparsity' concerns, and the minimum norm should get around the 'over-fitting' concerns. At least we don't have to worry about "large metric spaces"!

[Brian Solis]

Thanks for this Peter. This is right on the money and I fully agree. Really, most of the hype is looking at development technology as opposed to discussing the relevance of what the concept of Web 2.0 is about in the first place.

I wrote something that is complementary to your piece here
http://briansolis.blogspot.com/2006/05/web-20-internet-20-dotcom-20.html