Migration of Consumer Web Technologies into Enterprise World

As we trace the history of computing, it was primarily affordable only to the large organization with significant financial wherewithal. The introduction of a personal PC ushered into an era where the end consumers could enjoy some of the computational power.

With the rise of companies such as SAP, enterprise scale software became more prevalent. There were a host of companies that would design a solution and sell that solution to other large corporations (HR Management systems, Accounting systems, CRM systems etc).

However, with the rise of opensource technologies (Linux, Apache, tomcat and numerous others), there was a renaissance in full bloom. Interestingly, this phenomenon was driven by what we now call "Web Consumer Companies" -- companies that had websites and allowed end-users to interact directly with it through a browser. No expensive licenses or on-site installs were required.

Early pioneer in this area was Google (if you think about it carefully, Google's biggest contribution is probably the huge infrastructure rather than advertisements), which pioneered to use distributed computing using commodity hardware. Out of that effort came things such as MapReduce (and its ecosystem), BigTable etc. This sparked a revolution with other web-companies (FaceBook, Twitter, LinkedIn, Yahoo, etc) that were helping each other by contributing heavily to the open source initiatives.

This was a good thing and was completely driven by necessity. In the early 2000s, weblogic and IIS ruled the enterprise software vendor world. But, that came to a rapid end with the development of Apache and Tomcat, they were relegated into incongruity.

So, what good are these technologies to existing enterprises?

Well, a new spate of companies have realized the opportunity that these same concepts can be packaged up and re-sold to the traditional enterprises (these customers still like large packaged and supported softwares -- they don't think it is critical to employ software developers to use the open source systems). These companies are now seeing quite a bit of success. Here are some examples of such companies and how well they are doing:

1. Success Factors: By definition, web consumer companies were based in the cloud (in the sense that the data resided with the company). Successfactors combined that concept while automating the tedious HR review process. It was acquired by SAP in Dec 2011 for $3.4B (http://seekingalpha.com/article/312020-sap-s-successfactors-acquisition-a-1-2-billion-wealth-transfer) -- supposedly to enable SAP to adopt the same cloud-resident model.

2. Yammer: This was kind of a social network for the enterprises. Microsoft gobbled them up recently (June 2012) for $1.2B.

3. WorkDay: This is still a company in the works, but the founders essentially re-invented the HR management wheel in the cloud. Their revenues are growing fast (2011: $150MM, 2012 $300MM projection: (http://blogs.wsj.com/digits/2012/08/30/workday-discloses-finances-plans-for-founders-control/). They will likely replace things such as SAP/Oracle HR suites.

4. LinkedIn: I mention this since it is one of the few companies that is dual facing -- the consumer facing part that allows users to create the profiles and the enterprise facing part that allows companies to improve their hiring efficiencies. Additionally, they have figured out how to make the financial model work on both ends (a $20/month individual subscription vs likely a 6-figure enterprise license, an educated guess). They have managed to grow their revenues at a very healthy pace and have maintained their $10B valuation. It will likey replace companies such as Taleo, Dice.com, Monster etc.

5. Cloudera/MapR/HortonWorks: These companies are trying to make the core Hadoop software digestible for the large enterprises. I expect them to be valued quite highly. They are likely in the fray to severly curtail revenues for storage and database companies such as Oracle, SAP, EMC etc.

6. Stripe/Square: These are the new breed of startups that have embraced mobile devices natively and will likely be successful in displacing significant business from Visa, MasterCard etc.

So, where does this lead in the future?

I expect a large number of new companies to flourish. They will need to know how to use already successful technologies and marry that with an interesting enterprise problem to create substantial value.

If you know of any more emerging companies with this theme, I would love to hear about that!