What exactly do buzzwords like “Enterprise 2.0” and “enterprise social software” actually mean? Is there an opportunity for startups to build software for businesses and other organizations that can take advantage of the easy communication of blogs, wikis, bookmarking, social networks and other “Web 2.0” features?
Traditional enterprise companies like Microsoft, Oracle and its new purchase BEA have begun experimenting with offering these types of features — despite it still not being clear what the overall market opportunity actually is. Yet despite the increasing presence of old-guard companies, investors haven’t let up on funding new “social enterprise” startups.
One of the more interesting is Worklight (screenshot above), a company that offers a Facebook application that creates a corporate intranet within Facebook. The app lets users stay in touch with colleagues, publish news that would reach everyone in the company, and share data. It just raised $12 million in a round led by Pitango Venture Capital, with funding from existing investor Index Ventures as well as angel investor Shlomo Kramer, a security expert and chief executive of Imperva.
Also this week, an unnamed, unlaunched company founded by entrepreneur Jeff Dachis raised $50 million, to sell “social software to enterprises.”
The key, as one pundit put it, is to drop the buzzwords and think about how to help clients “in terms of an agile, low-cost approach. This makes sense to a lot more people.” For example, wiki startups like PBWiki, SocialText and Jotspot (now part of Google) generally explain their products as an easy place for everyone to share documents, lists and other information, instead of having to email everything around.
These companies tend to serve small organizations, though, and social software can mean a lot more to large organizations. Small World Labs offers white-label social networks, and makes a point of working with individual customers. It has added 50 new clients in the last nine months, including Beliefnet /Fox Digital Media, American Academy of Pediatrics, American Cancer Society, Melcrum and Domino’s Pizza MATRACA. Other clients include online sites for publications such as The Dallas Morning News, the San Diego Union Tribune and Guideposts.
Of course, this software isn’t particularly sexy but, for example, it helps a company like Melcrum, a 25,000 member worldwide trade organization for people who do internal (employee) communication between parts of large organizations, to share best practices more easily. See screenshot above.
The problem with being a social enterprise startup, as entrepreneur Jeff Nolan says, is that its inherently not scalable if you aren’t one of the large companies that already have all of the contacts in the market. There is no distribution mechanism to get widespread adoption of your software across many companies if each deal needs to be done by a salesperson, and requires customization.
With the largest enterprise software companies likely to maintain their hold on the largest clients, and the encroachment of web products reaching the smaller businesses, the big opportunity is with mid-sized companies, according to a recent report by consulting firm McKinsey.
“For SaaS platform startups,” Nick Carr writes about the report, “that means trying to get into a room where there are already two elephants vying for the customer’s attention. Success will mean locating a unique niche – and being prepared to have it invaded.”