Salesforce.com and other enterprise application vendors already have LinkedIn on their radar as a potential partner opportunity, but might want to consider plotting LinkedIn in the ‘threat’ quadrant of their SWOT analysis as well. With their recent investment in LinkedIn, SAP has made a good and decisive move to stay ahead of the pack and guard against this double-edged sword.
The threat emerges because business networking and the social graph may prove more valuable than process automation owned by the enterprise application vendors, and business networks may become the logical and best platform for enterprise applications. If this happens, enterprise application vendors will lose the mind share and ownership of the end-user. In enterprise deals, these enterprise application vendors could find a new player at the table or, in the worst case, they could lose strategic control of the account.
To date, Oracle has made a successful argument that it’s dominant database is the logical platform for enterprise applications, and Salesforce.com has made a compelling argument that it’s hosted platform is the logical platform of a broad range of apps in their AppExchange. But business networks like LinkedIn offer two key advantages neither Oracle or Salesforce.com can: (1) socializing core business process and (2) adding a level of user engagement that enterprise vendors can’t match.
On the first count, business networks provide a vital social foundation for a huge swath of the the processes that enterprise applications automate. For the last twenty years, most enterprise applications have ignored the social networks that connect the people involved in these transactions. The very concept of ‘process automation’ has deliberately focused on process instead of people, and it has become increasingly clear that this has been an oversight. Selling and marketing are social transactions – where people are as important as process. Where company A buys from company B, it’s often as accurate to say that Alice is buying from Bill. Other enterprise applications like human capital management and recruiting also focus on clearly social transactions. Even seemingly dry applications like accounting applications and supply chain management software have undeniably social components – just ask the purchasing manager at any large company.
On the second count, business and social networks have delivered a level of user engagement that has perpetually escaped enterprise application vendors. Their origins are largely to blame: they were built for the management that writes the check, and this DNA has proved powerful. Simply put, people haven’t used them. Even recently, SAP wisely worked to bury the entire front end in Microsoft Outlook, a tool that business people use. Since the value in these systems is often only as good as the data contributed (think sales pipeline and forecast), their value in compromised by the lack of user engagement, activity and contribution. In contrast, people use social networks, use them often, and increasingly use them for business.
LinkedIn recently opened it’s application platform, allowing users to install certified applications, ala Open Social and Facebook. To date, we’ve seen light applications from Twitter, Google, and Typepad, but there is also an interesting collaboration application from Huddle, and I suspect that it won’t be long until we see applications that touch the heart of Salesforce.com and Oracle. And SAP. Given LinkedIn’s user base, CRM functionality may come first, and I’d argue that an inside sales representative with a dozen of contacts to call through in a given morning would prefer to see that task list as a widget in LinkedIn, surrounded by a robust set of tools to research and research the person, than in their CRM application.
In the consumer realm, we’ve seen a thousand applications that would have been built as stand-alone products in 2005 and hundreds that would have supported stand-alone companies, all of which are now more logically deployed on Facebook’s platform. It’s a positive sum game, where the application vendor benefits from the value offered by Facebook’s network, and Facebook benefits from the value that the application delivers the user. But in the process, the application vendor has ceded control to Facebook, and when Facebook decides to take a feature in house, or changes how applications are managed, that control is evident.
There is a counter strategy that enterprise vendors should look at that could prove effective, and it involves bringing the network to the applications instead of the applications to the network. This is analogous to Facebook Connect and Google FriendConnect, where different applications and web sites like Digg can allow the user to interact with their friends and colleagues without leaving the site. In the process, the sites get to offer the social value-add without losing ownership of the user. However, this approach depends on the ‘openness arms-race’ that Google ignited by launching OpenSocial as a competitor to Facebook. Without as strong a competitor in the market, it’s unlikely that LinkedIn will open up in a similar fashion, and their slow, measured approach to opening the platform is evidence of the lack of competition in the market.
Similar to the consume realm, it sill be a positive-sum game, and enterprise application vendors will find their applications become more valuable as their users tap the social functionality of these networks and become more engaged and more active. But like Facebook, more value will accrue to the business network, and these application vendors may find themselves in their enterprise deals with a new player at the table.
Bottom line: Enterprise vendors should consider business networks a threat, not simply an opportunity. They should consider collaborating to drive the same level of competition and openness that exists in the consumer market, or they might find a new and potentially controlling player at the table.