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My idle thoughts on tech startups

Consumer tail wagging the enterprise dog

Lee Hower
January 23, 2007 · 2  min.

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Yesterday’s announcement by IBM of the launch of a suite of “Web 2.0” tools for businesses triggered the impulse to finally write a post I’ve been contemplating for the last couple of months. I can’t say that I’ve ever been among the greatest of trendspotters, but a clear pattern has emerged from both startups I’ve been looking at over the last 6-9 months as well as some broader events.

In the latest wave of internet technologies (“Web 2.0” if you must label it), the consumer tail is fairly clearly wagging the enterprise dog. This is actually a significant departure from most other adoption waves of IT technologies. Think back to the macro technology shifts of the last several decades and essentially all of these began with large enterprises leading the first adoption, paving the way for widespread consumer adoption years later. I’m undoubtedly missing plenty here, but just a few high-level trends include:

1) Wireless communication devices –> pagers, then cellphones, then Blackberry type devices all were driven by business customers initially

2) Client/server networking –> existed in enterprises since the ’80s and common since the early ’90s (remember Novell??), only recently (last 5 yrs) has home networking taken off in a meaningful way

3) Personal computer –> despite the “personal” in PC, desktop computing first emerged in businesses in ’70s with workstations and even in the ’80s the market was driven primarily by enterprises rather than purchases by consumers

What’s different about “Web 2.0” technologies like online video & webcasting, distributed publishing (blogs, wikis, podcasts), and social networking? All of these took hold first with consumers, yet are now garnering increasing attention from enterprises. Enterprises will ultimately care about certain features and functionality that may be of less concern to consumers: security, archival & audit, scalability, compatability, and more. But I’ve met with promising startups in video, publishing, and social networking which are focused on selling these technologies to large corporations.

Only time will tell of the durability of “Web 2.0” in the enterprise… is it simply business’s reaction to the rapid growth YouTube, Wikipeda / blogs, and MySpace or a clearer ROI-driven strategy? Can technologies supported by ad-based or “freemium” revenue streams in the consumer world be easily adapted to enterprise selling models? No matter how things shake out, I think that enterprise adoption of Web 2.0 is a very real trend for 2007 and beyond. And undoubtedly some of these forward thinking enterprises will realize benefits of these technologies in richer and broader interactions with their employees, trading partners, and customers.


Lee Hower
Partner
Lee is a co-founder and Partner at NextView Ventures. He has spent his entire career as an entrepreneur and investor in early-stage software and internet startups.