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February 13, 2001 Event
Stepping Beyond the Consumer Market: The Enterprise Strikes Back
Besides rocketing IPOs, generous stock options, and twenty-something
celebrities, the last five years have produced an almost unprecedented
amount of technology innovation. Not surprisingly, the consumer realm
enjoyed the immediate benefits of this gush of advancement – desktops,
laptops, handhelds, and all other manner of consumer devices now are
blossoming into near prototypical forms. Yet while consumer-facing
technology has flourished, some of the most promising opportunities
are just now being exposed, and in a wholly different sector: the
enterprise. The corporate market inherently may lack the consumer
market's sexiness, yet the overall dollar impact of technological
advances in the enterprise arena may well eclipse the consumer sector’
s impressive glow.
The timing for enterprise seems to be right. Volatility in the
consumer market is encouraging innovation focus towards corporate
opportunities. Players include powerhouses such as Oracle and Siebel,
along with newcomers such as JamCracker and Loudcloud. These
opportunities are strikingly different from the visions of global
exchanges many associate with the B2B movement. Rather, the enterprise
opportunity lies in using software and services to make basic business
processes more productive. Benefits include immediate cost savings as
well as revenue growth. Since all businesses operate with some amount
of inefficiency, enterprise applications can help grow the business –
and cut expenses – by squeezing more out of resources already
employed.
The opportunity is vast. Like the PC revolution before it, the
majority of technology dollars have yet to be spent in this next wave
of innovation. In addition, CIOs finally are putting Y2K fears behind
them and reallocating budgets to allow their companies to take
advantage of new technologies in the post-Y2K era. But will the
promise of increased savings and growth live up to the hype? And what
specific business functions are best suited for these kinds of
benefits? Another open question is whether the winning formula more
closely will resemble in-vogue ASP solutions or traditional
shrink-wrapped software. One thing is certain: though enterprise’s
market opportunity may be larger than that of its consumer brethren,
the road to riches there may be similarly more difficult.
E-Business Software Holds Promise from Investors
Clearing A Path through the Tech Logjam
Software Companies Rise Above Tech Pessimism Key Learnings
THE BIGGER THEY ARE, THE HARDER THEY FALL
Established enterprise application providers such as Oracle, SAP, and Siebel will not continue to dominate their respective, horizontal niches. A trend of fragmentation and expansion is forming in the enterprise application space: e.g., ERP to CRM, SCM, eCRM, CIM. This trend will accelerate and business process specialization will outpace niche domination by enterprise application giants. Smaller, nimbler point solution providers will focus their efforts on easing specific pains and integrate their applications with others to deliver their piece of the elusive "total enterprise solution."
EXTRANETS = B2B EXCHANGE TRAINING WHEELS
B2B marketplaces will not take off in the short term. Due to hype fueled by both the venture community and the media, B2B exchanges were introduced too soon into a business-to-business environment that lacked the liquidity necessary to allow them to thrive. Until B2B exchanges gain traction, extranets will provide basic functionality for trading partners. These extranets ultimately will grow into mature trading systems which will more closely resemble the grandiose B2B marketplace visions circa 1999.
ASPs: THE HELPING HAND FOR SMALL BUSINESS
Small and medium-sized companies are more likely to utilize ASPs than larger companies. These companies are most likely to use ASPs for services peripheral to the core function of their businesses, such as Human Resources and Accounting, which have very clear standards in place. Customization and adoption issues increase dramatically as specific core business functions are outsourced, turning the ASP model into a crutch for smaller businesses until they can complete their natural growth spurts.
THE PRICE ISN'T RIGHT
Pricing is a core business function that represents a great opportunity for a new ASP product. Many SMEs, startups, and ongoing businesses have not figured out how to efficiently model demand and set prices. Industries such as airlines, hotels, and financial services have highly sophisticated approaches to pricing. Yet most companies effectively price on intuition with scant market feedback. ASP opportunities exist to help set prices by bringing sophisticated models and math analyses to companies' customer and product data. Such services would rely heavily on consulting services alongside software systems and might be considered appealing in down markets.
QUOTES OF THE NIGHT
"How are net marketplaces doing? Just look at ICG’s stock price in the last year."
"Any business plan that says ASP goes straight to the wastebasket."
