Chris Lynch over at CIO Magazine has a nice write-up on the Enterprise 2.0 market that is likely to ruffle a few feathers — Microsoft Sharepoint vs. Enterprise 2.0 Start-ups: Day of Reckoning Arrives. All in all the article does a very nice job of aggregating a diverse set of viewpoints and there are a few quotes from me personally (turns out I was the one to call Sharepoint 2010 a “day of reckoning”).

There are few things that do need a little clarification:

• The day of reckoning is at least a year off. SharePoint 2010 won’t be out this year, and it will take 4-6 months before a mass of companies actually complete their rollout. That said the SharePoint marketing machine will likely start working overtime in the next few months, so the impact will start to be felt before then. Then again I was speaking at the Gilbane Conference last week and noticed the Microsoft booth was still pushing SharePoint 2007.
• Existing Enterprise 2.0 customers will be unlikely to sink a lot of resources into switching. For companies like Jive, Telligent, NewsGator, and Atlassian the problems with SharePoint 2010 are going to crop up with new deal flow. It is unlikely that existing customers will jump at the first opportunity to take on a major transition that will require major IT resources, content migration, and (most importantly) user training.
• The market will be defined by incremental innovation for the foreseeable future. In the article Ross Mayfield, president and chairman at Socialtext, makes the important point that Microsoft is on a much longer development cycle than its smaller competitors: “A year ago, the idea of having micro-blogging and activity streams for the enterprise was a new concept. Well, that’s around the time they probably froze the spec for SharePoint 2010. Overnight, the demand for social software changed, and it will change again.” These innovations will have an impact on the usefulness and fidelity of Enterprise 2.0 tools, but I would not characterize these as major innovations; it seems unlikely that many companies will make a decision based on these incremental innovations.

Now, while I do believe that there is a base level of collaboration that will become a commodity (the broad collaboration that Microsoft and IBM will provide) there are some very important ways that the smaller vendors can stay relevant.

• Focus on the customer facing market. The customer facing side of enterprise Web 2.0 — the use of these tools by marketing departments — is going to remain hot, and differentiated, for quite a while longer. There is big business here and most vendors in this space already play in both camps.
• Tie the internal and external market together. Customer facing communities are great, but few thus far are having a real material impact on the business. Why? It’s a long manual process to take insight from the community and bring it into the business. Those vendors that can best tie these external marketing communities to internal productivity and collaboration communities will help their customers truly realize the value promised.
• Provide customer and partner communities. The extranet has long been the red-headed stepchild of enterprise collaboration because, frankly, its costly to get customers and partners working alongside employees and so far the tooling has been poor. That problem is rapidly disappearing and the vendors that can best equip their customers to get real work done with outside groups stands to make a lot of hay — and unless Microsoft changes its licensing model this is not a place it can compete.
• Get vertical specific or process specific. If the base level of collaboration is commodotized what is the next logical step? Get more relevant to the business. This will mean creating collaboration applications or modules specifically tuned to the industries and processes of the customer and providing a much improved out of the box experience for things like project management and innovation as well as a top shelf application for Law firms, doctor’s offices, and restaurants. NewsGator is already heading down this path with innovation and PbWorks is already heading down it for Law firms. Its a smart move and will save a lot of companies.

All told this market is set for a major change, and many of the vendors we know today will no longer exist — Microsoft is raising the bar and some vendors won’t get over it. But some will, and those that do should have solid businesses to show for it.

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There has been a lot of interest in social networking for the enterprise over the past 12 months. Many vendors are now bringing a people-centric view of content and data to previously document-centric apps and the smaller Enterprise 2.0 vendors like Jive, MindTouch, NewsGator, Telligent, and a host of others are making employee social networks their bread and butter. Forrester is bullish on the idea, and cited social networking as one of two Enterprise 2.0 feature that will have a significant impact on the enterprise (wikis were the other — see ZDNet for a thorough writeup).

At the same time though there is reason for caution, and there is no better example why than the “Add to My Colleagues” feature in SharePoint (see screenshot at left). I think I can guess what Microsoft had in mind — allowing employees to declare who they work with and thus keep better track of them through the MOSS 2007 MySites functionality — but the execution is exactly what is wrong with social networking in the enterprise. Look, this is not Facebook or LinkedIn where I need to tell the network who of the millions of users I know. This is a group of employees within in company and, despite the fact that I haven’t hit the link, everyone is my colleague. We already have a damn good reason to talk to each other: we are working for the same company and towards the same goals! I don’t need to gently approach you by “colleaging” you first, I can just pick up the phone or send an IM or email. Declaring this affiliation over and over again just wastes time and hurts the credibility of social networking in general. Facebook is about collecting friends. LinkedIn is about building a professional network. Social networking in the enterprise is about getting work done and features like this give both users and execs the impression that these apps are ab0ut wasting time.

Now maybe I’m being too harsh on Microsoft; other social networking vendors have similar features, and the next rev of SharePoint should (I hope) have this sort of stupidity taken out of the product. But Microsoft, for all its deficiencies in this space, is looked to as a leader by most businesses. The precedent and impression that Microsoft sets is a tough thing to break. And in the meantime “Add to My Colleagues” keeps the focus for social networking in all the wrong places and hurts the credibility of both SharePoint and the enterprise social networking category at large. Frankly if I were an exec presented with the great idea that my employees could create networks of colleagues I would kick both the sponsor and the vendor out of my office, never to return.

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MindTouch has reportedly grown its revenue very aggressively in its past fiscal year. According to VentureBeat, “in the year ended October, the company says its revenue grew 612 percent while the number of customers grew 368 percent.” The company blogged about the news earlier this week.

This is a big number but not unexpected. MindTouch was growing from a small base — MindTouch is an open source company — and the wind was most certainly at the company’s back in 2007-2008. As someone who predicted a 47% CAGR for the enterprise Web 2.0 market its nice to see these kinds of numbers, though clearly they are not going to be typical for the industry as a whole.

No word yet if the company is profitable — my gut says no — but in either case congratulations to Aaron and the team.

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Lawrence Liu has just announced he is joining Telligent, one of the small nimble competitors to SharePoint, his previous gig. Normally the comings and goings of various executives and staffers does not raise my eyebrows, but this one did. Telligent, Jive, Awareness, Central Desktop, and a whole horde of players are all gunning for SharePoint and Telligent just added a major weapon in that fight. So what does it mean for the market?

1. Pay careful attention to Telligent’s moves and marketing. If anyone knows where the warts are for SharePoint — and the upcoming refresh slated for 2009 — its Liu. Telligent should be dropping hints along the way.

2. Look for the whole market to benefit at SharePoint’s expense. While this does not change the fundamental advantages SharePoint enjoys — chiefly bundling and existing enterprise relationships — it does give all the smaller competitors another compelling argument for SharePoint’s insufficency as a true Enterprise 2.0 platform.

3. Telligent may see its relationship with Microsoft change quickly. It’s no secret that one of the best ways for a small Web 2.0 vendor to grab customers is to partner with SharePoint and so far NewsGator and Atlassian (and a few others as well, if I remember correctly) have done so to great success. I would expect Telligent to work out something simlar quickly unless the departure was messier than Liu has let on.

4. Liu and Sam Lawrence have to make up. Don’t they?

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