Date: Monday , February 02, 2009
When Microsoft announces layoff of 5,000 employees and the stocks of enterprise software bellwethers like SAP and Oracle go down by 50 and 30 percent respectively, it does not look like a time to talk about opportunities in enterprise software or any other technology area. However, opportunities for entrepreneurs abound in enterprise software.
The worldwide enterprise spending in 2008 was $230 billion and as late as December 2008, Gartner projected the worldwide spending on enterprise software to rise by 6.6 percent to $244.3 billion in 2009. So it’s a big enough market and there are technology trends, shifting of enterprise needs, and buyers’ remorse at spending huge sums of money on mega projects; all these present opportunities for entrepreneurs to exploit.
As for technology trends, Enterprise software customer survey 2008 by McKinsey & Company and SandHill Group found that innovation in enterprise software has two main technology drivers, Software as a Service model (SaaS) and Service Oriented Architecture (SOA). Though SaaS and SOA have been on parallel development paths till now, they are expected to converge in future. According to this survey, a very high segment (74 percent) of enterprise customers are favorably disposed to adopting SaaS platforms.
Enterprise needs are changing due to explosion in the capabilities and volumes of mobile devices such as iPhone and Blackberry (Innovation Opportunities in Enterprise Software, page 28 in this issue). Another game changer is of course the popularity of new SaaS applications, which create a need for integrating them with existing on-premise applications.
It’s a well-known fact that large enterprise vendors make tons of money by maintenance contracts and buyers are increasingly questioning the practices and pricing for maintenance contracts. As Ray Wang of Forrester Research points out in his 2009 enterprise software predictions, lack of third party maintenance is seen as anti-competitive and customers will demand options. He also predicts that system integrators will forgo vendor “warnings” and will deliver on third party maintenance. This is a huge opportunity for India based entrepreneurs in IT services space to take on.
Another positive sign for the enterprise software startups is that existing vendor relationships are very low on the priority list of most customers; indicating a willingness to switch vendors and providing a window of opportunity for new entrants. So, even though it looks like we are in the worst recession since 1982 with no near term end in sight, at least in enterprise software, entrepreneurs have the opportunity to create new lasting companies.
A Word about Satyam!
This is the biggest news to hit Indian IT industry and it’s nice to see the active participation of our readers in the ongoing debate by way of sharing their views on the website. In fact, our initial story generated more then 500 comments by users. However, we strongly disagree with the views presented by several industry leaders in India that somehow the Satyam saga is going to adversely affect the reputation of Indian software industry. Even if all that is reported is true, there has been no visible effect on customers, businesses, and even the amount of money involved in the scam - about $1 billion - is tiny compared to the $50 billion Ponzi fraud of ‘Bernie’ Madoff in New York in December 2008. No one in the U.S. says that the whole hedge fund and managed money game in the country is tainted and the reputation is spoiled forever by this gigantic fraud. The same should hold good for the Indian software industry too. One bad apple wouldn’t spoil the whole green bunch. In fact, in the long run it may be good for the Indian software industry as customers in the U.S. will know that even large vendors are not stable and so they should give work to multiple smaller vendors in India to reduce the risk of the undesirable impact of the fall of one big vendor.
I hope you enjoy the issue. Please do email me your comments and success stories!