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Three Trends Influencing Enterprise 2.0

In this post, I will describe the top three drivers influencing the adoption of Web 2.0 in Enterprise 2.0. In my next post, I will express my opinion on whether mashups are capable of pushing Web 2.0 into the enterprise arena.

Trend #1: Shift to Cloud Computing
In “cloud computing,” documents and business information are managed online. Google is rapidly building an amazing platform for rolling out on-demand applications on a worldwide scale. Very soon, Google Apps will be a good-enough solution for millions of small business to solve most document management and collaboration problems. Have an idea where all these multi-tenant applications and zetabytes of data will be hosted? Google will spend $500M $3B this year to build the largest data center in the world. Services like Amazon EC2 (covered here and here) offer pay-as-you-go fully managed server time. On-demand computing is going to completely change enterprise IT architecture. When it only costs $70 a month for a dedicated virtual server with fantastic connectivity 24/7, and you can turn them on and off as needed, why would you want to mess with hardware on-premises?

Trend #2: Growth of Web 2.0 Content and Infrastructure
Since 2005, many successful venture capitalists have been trying to find yet another promising Web 2.0 startup to add to their portfolios. Pundits speculate that during the last two years close to a billion dollars were invested into Web 2.0. During the next five to seven years all this money will pull off a lot of infrastructure with an enormous amount of content and data on it. But in order for a Web 2.0 company to secure longevity, aggregating terabytes of user-generated content and having lots of servers to serve traffic to gazillions of registered users is not enough. You’ve got to create an ecosystem. How will these newly-minted Web 2.0 companies create ecosystems? Ecosystems will come through APIs and data mashups with other websites. ProgrammableWeb maintains the best up-to-date API directory. Look at how fast APIs are being added to their database. In a very short period of time, the key advances of Web 2.0 (namely collaboration and new ways of sharing information) will become an attractive target to benefit enterprises.

Trend #3: Mashups
2007 has been named by BusinessWeek as “the year of the widget.” Widgets are small embeddable components that can seamlessly integrate on third party sites and can deliver content from beyond the realm of the site. To help users create widgets, a growing number of companies out there are developing mashup building tools:
I learned about Dapper at the Mashup Camp unconference at MIT on January 17, 2007 where I met Eran Shir and Jon Aizen, the company founders. Dapper is an impressive new online mashup tool that takes the concept to the extreme, making it possible to convert and reuse just about any source of information on the Web, including that in plain old HTML. This promising startup has recently closed a round of financing with Accel Partners.
DataMashups.com is a new highly Web-centric mashup tool complete with a WYSIWYG “edit” mode.
Grazr is an application development system for feeds and their GrazrScript is a programming language for feeds. John Musser of ProgrammableWeb posted a recent news update on Grazr closing $1.5 million Series A round of financing.
JackBe’s JackBuilder product is a browser-based mashup tool to create mashups called “Rich Enterprise Applications” or REAs. JackBuilder is an entirely Ajax based IDE that allows widgets, components, and services to be integrated together into enterprise mashups
All of these tools allow for building a quick and dirty SOA, and are aimed at technology enthusiasts. Focused on web screen scraping and RSS, today’s mashup design tools could hardly be applied across the enterprise sector. But that will change. Mashup technologies can and will disrupt enterprise applications. During the next three years, mashups will open up a new enterprise application market, providing business users and IT departments with a quick and inexpensive approach to develop and implement applications. And during the decade following 2010, maturing mashup building technologies will shrink the enterprise application market. In my next post, I will write about whether mashups are capable of pushing Web 2.0 into the enterprise space.

 

 

Fedora’s Community Leader Needs Medical Help

UPDATE FROM MARCH 18, 2007: Folks, the latest news… Jack is OK now, and has received a lot of attention from the community willing to help.

……….

I just received this post by RSS from Matt Asay’s blog. Jack Aboutboul, who is in charge of Fedora’s marketing, is very sick. He’s looking for help:

We are part of a very smart and very well connected community of people, especially when it comes to scientific matters. I know that a few years back Patrick Volkerding, creator of Slackware, had some crazy rare health issues and by posting online was able to find someone who led him to a proper remedy. I hope we have enough smart people around that will be able to do the same for me. Please pass this on to anyone you know, its a desperate plea for help. Obviously pass it on to scientists, doctors, pharmacists, etc. but please also pass this amongst non-geeks because I’m sure someone out there knows someone who can help.

If you have any ideas, please pass them along to Jack using contact information on his blog.

Seven Qualities of Highly Successful Open Source Software Company

Six days ago, I wrote about the key factor influencing disruptive market strategy – New Market. This post summarizes six additional characteristics of a truly disruptive open source business. Most of them derive from one of the best books I can think of in the area of disruptive business models, The Innovator’s Solution: Creating and Sustaining Successful Growth by Clayton M. Christensen. Here are all “Seven Qualities” as of March 18, 2007:

1. New Market

I believe that a new business model alone doesn’t make it, be it open source, or SaaS, or whatever. The key idea is that in order to be truly disruptive, an offering has to address a large underserved market segment, and create a NEW market in the first place. In commercial open source, the initial target is never the existing users of expensive, proprietary software. What the heck can they do with your scrappy product? The best target market is a highly growing underserved market with a lot of demand and little to no supply. Similar to what MySQL offered to all Internet small businesses who can’t afford MS SQL or Oracle database to power an e-commerce shop or a content management system of a micro business with little to no revenues. Then move up the stack and target the ones who have the budget, but are still not willing to pay 5K-20K for a piece of software if there is a cheaper or better yet FREE alternative.

2. Low Price

It takes 5x to 10x the price advantage between what your proprietary competitors charge for a solution and what a commercial/supported package of your software costs in order to create enough disruptive “leverage” to cross the chasm and enter the mainstream market.

3. Good-enough Product

A product/solution should be good enough to solve 50% to 80% of the most common customer needs. At the beginning, your competition will not consider such an  offering as a threat at all, as it doesn’t have all of the “things” and “features” their BMW-driving sales force is communicating to prospects all day long. Their customer and your customer are two different animals.

4. Easy to Implement

The product should be simple enough that it can to remain easy to implement and extract value from. Take Mule, a highly successful open source ESB as an example. Mule can be installed in several minutes compared to hours to install and configure proprietary products from EII/ ESB vendors such as TIBCO. At Apatar, we strive to do the same and make sure Apatar ETL can be installed in two minutes or less.

5. Community of Loyal Users

There should be enough supporters willing to contribute their time to requesting new features (compliment Product Marketing), testing your software and reporting bugs (compliment QA), and developing new product functionality (compliment R&D).

6. Standard Technology

A disruptive open source product/solution should utilize widely used technologies, which have already become or could become a “commodity”-type component in a technology stack, LAMP or Java.

7. New Distribution Channels

The traditional distribution models are not good for a truly disruptive product. No BMW-driving sales folks to “push” your product into the market (unless you are really short on time and have VC backing to support some direct sales). The Internet is replacing most roles in the marketing, PR, and sales functions of an emerging open source start-up.

If you have ideas about any additional components that make an “essential” package of a disruptive open source software start-up, I’d love to hear about them.

ETL vs. ESB

A few months ago, prior to the release of the Apatar Community Preview, Matt Asay asked me via email whether Apatar competes with ESB products, specifically with MuleSource and ServiceMix. After I responded to Matt by email, I thought about posting my response to a blog, and Matt said, “Go ahead.” In fact, two people asked me a similar question during the MySQL User Conference, which reminded me about the email that I’m posting below.

The short answer is that Apatar is an ETL (Extract, Transform, and Load) technology; ETL does not compete, but compliments ESB products across different information integration scenarios. ServiceMix and Mule are ESB products. ESB is a standards-oriented (in the SOA age) EAI/EII technology. Therefore, I will address the comparison question, “ETL vs. ESB” from an ETL vs. EAI/EII point of view. EAI, by the way, is a term coined by Dave Linthicum in his book (published in 1999) called, “Enterprise Application Integration.”

ETL is geared toward data movement, typically in batch modes across the enterprise. It is “pull” technology and works on user’s demand or on schedule.

ESB is a “push” technology, sending messages when they occur.

ETL is a “pull” technology, works on demand/on schedule.
ESB is a “push” technology.
ETL cannot time-out, decay, or issue transactions to front-office applications during transformation processes.
ESB is capable of timing and decaying data in queues, escalating information content to the right decision-maker on that piece of content.
ETL is fully scalable, capable of loading massive batches of data in parallel.
ESB is not suitable for massive volumes of data because of its service bus architecture (by network, and source system speed to X transactions per second).
ETL can hook to ESB/EAI middleware as just another feed, if desired.
ESB’s primary job is to integrate applications, opposed to Data Migration, Replication, Data Warehousing, and BI.
I can also refer you to a comparison table I found at http://www.coreintegration.com/solutions/di.asp:

Feature
ETL
EAI
EII
Timing
Batch snapshots
Real time
Real time
Unit of work
Set of transactions committed within an ETL cycle interval
Single business transaction
Single business transaction
Historical Record
Yes
No
No
Persistent Auxiliary Tables
Yes
No. Transactions applied directly to applications’ tables
No. Virtual database
Application
Managerial reporting, trend analysis, multi-dimensional aggregation
Near real time synchronization of operational data where transaction commitment is dependent on state of related transactions
Near real time decision making based on most current information in operational systems. No update.
What it’s not
Not source of record. Does not support transaction processing
Not appropriate for ad-hoc analysis and reporting
Not a virtual data warehouse
At the end of the day, I think that business users have to consider their unique requirements, and pick the technology accordingly. There are different horses for different courses. Be it Apatar, Mule ESB, DataStage, Yahoo! Pipes–whatever works.
In my opinion, as more vendors enter the information integration space, they are confusing things even more because of the differences in technology they are offering. No two are alike, but all are calling themselves data integration vendors. Go figure.

Free vs. Cheap: It’s NOT About Shrinking a Market

Josh Kopelman of First Round Capital, an early stage investor in many Web 2.0 emerging leaders (including Wikia, Mashery, and Odeo), posted an excellent article on the emerging business models across many industries:

“Here at First Round Capital, we see a lot of business plans for consumer-facing internet services. Most assume a significant portion of their revenue comes through advertising — but almost all of them have a “premium/subscription” option. Typically that subscription revenue accounts for 20-40% of total revenue, and is based on a very low ($1-5/month) subscription fee. However, that is rarely how things play out. Most entrepreneurs fall into the trap of assuming that there is a consistent elasticity in price - that is, the lower the price of what you’re selling, the higher the demand will be. It happened in music. It happened in movies. And it’s happening in directory assistance. Now I’m looking for other industries that are going to be converted. If you’ve got a plan that uses the free model to get that first penny and disrupt an industry, I’d love to hear about it. It’s a great way to shrink a market.”

When reading this, IT folks think, “open source.” Looks like that’s exactly what is happening in enterprise software. Open source vendors play the price elasticity game in the demand/price equation. Commercial open source vendors are sizing down their markets by offering free to low-cost solutions where the buyers get far more value for the dollar. But that’s only on the surface.
What I would like to describe is why open source/free software is not about shrinking the markets. Of course, there will be many cases when market leaders will have to step down.

Middleware

IBM has $2B running on WebSphere. Looks like for every dollar of revenue JBoss made, it took two dollars of revenue from BEA and one from IBM. JBoss made its fortune from shrinking the middleware market.

Data Integration

Informatica SOLELY DEPENDS on license revenue from ETL tools.
IDE Tools Borland has had its IDE business on the auction block for a while and is realizing it’s not easy to find a buyer for a sinking ship. Did Eclipse play a role in replacing Borland IDE tools? Sure it did.
For Informatica and BEA to transition to cheap/near-free subscription and OSS is a systemic shock that might literally kill them.There is no doubt that the existing software leaders would have to shrink their appetite significantly, since the disruptive newcomers have totally different cost structure and distribution business models. When you look at the drivers of the seismic shifts going on in many markets, the disruptive business models are not about shrinking markets. It’s not about “evil communists” dreaming about getting the behemoths of the software business to die. I don’t think they will.

What really happening is that new value is being created in the marketplace. Open source is so successful because it’s creating new markets. That’s the key for a true market disruption.

Just a few years ago JBoss, now a RedHat company, and MySQL were not going after the Fortune 1000 enterprise market. They are best at enabling underserved customers who previously could not afford expensive proprietary software. Now, JBoss is a part of a public company, MySQL is VC-backed, and they both have external shareholders. The latter demand returns on their investment thus pushing portfolio companies into a replacement business where the money is. But what these companies are best at is not a replacement business.

Open source is so powerful that it can destroy a license-driven software business. But the truly disruptive businesses are successful as long as they create new markets in the first place, not shrink the existing.

Did Oracle Scare the BI Community with Hyperion’s Acquisition?

Oracle is chasing SAP like never before. Now, thousands of Hyperion customers who run SAP will view their business through an Oracle/Hyperion BI “lens.” Tony Baer posted a good review about the transaction. I can’t disagree with Tony about further market consolidation and Business Objects/Cognos being the two BI leaders left out there. Two years ago, IBM acquired Ascential Software to round up its data integration offerings, and the BI acquisition is only a matter of time. My prediction is that Cognos will be the target.

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