Barry Talks! : Common Sense for Uncommon Times

Friday, October 6, 2006

Notes on Enterprise Software

A really interesting post by Jeff (who as far as I can tell still isn't saying what his new gig is). Attending a VC conference in Boston he notes that East Coasters haven't internalized Web 2.0/Enterprise 2.0, and as a result are still investing in the "old model" of enterprise software:

...there are no new big killer apps that are going to be built for today's enterprise. Global business has spent the last 40 years automating every corporate function that is worth automating, and then they automated it again through "process reengineering" and once more when that didn't work out quite like everyone thought. Today's enterprise software market is about finding gaps and filling them, linking products in new ways, and leveraging more value out of IT investments that have already been made.
There's a certain element of truth to this, I think, even though prognostications about "all the innovation has been done already" are usually wrong (didn't Aristotle once say that every idea had been had already?).
Now, on the one hand I doubt we'll see a new invention as seminal as the relational database any time soon. On the other, we are still in the infancy of such leading edge database applications as master data management, customer data integration, and product information management, to name a few. It's true there are product pieces here and consulting pieces but most importantly there are radical business-transformation implications to these technologies.
Further, we have on the whole yet to realize the benefits of SOA -- which to me boils down to the easy and secure composability of business applications. You can talk all day about service discovery, fine/coarse granularity, security models, etc. -- and make no mistake these are important -- but the value is in the agility that rapid app composition gives to the enterprise.
Net-net, while perhaps the low-hanging fruit of certain business applications is commoditized into the SaaS model, the work of enterprise software is far from done. Ultimately, businesses must make the following critical tradeoff: by keeping relevant software on-premise, you retain the ability to manipulate it for competitive differentiation (if you own the customer database you can modify it to meet new business needs as they arise). Costco and Sam's Club compete on very different views of the customer, for a real-life example.
So ultimately, it seems to me, CIO's and the business need to very soberly consider what they gain and lose by outsourcing certain intellectual assets. In some cases it makes sense. In others it does not.

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