Trends in enterprise software space
Date: Monday , October 01, 2007
Amish Jani, Principal, Pequot Ventures
We witness a continued interest in the optimization of existing IT infrastructure on the enterprise side. People have quickly moved to platforms like VMware to get better utilization of their physical server infrastructure. Their success, as demonstrated by VMware’s recent IPO, has led to the second order problem of managing the virtual instances. Earlier you had one physical server, one OS, and one application instance to manage. Now, you have four virtual servers with four OSs and four applications that are running on that same single physical machine. Better utilization but much more complexity. Companies like Bladelogic which recently went public, and Opsware which was acquired by HP, and startups like Scalent Systems are helping to manage, provision, and deploy these complex virtual environments and we will continue to see innovation driving around true automation into the enterprise.
The second area seeing significant activity is the analytics space. With the huge growth of data and data sources, and improved access to the data, enterprises are trying to extract better information and learn more from it. We are seeing a lot of innovation in companies developing software-based analytics platforms to help companies mine information both at the infrastructure and application layers to do things like dynamic pricing or real time decision support or enhanced marketing.
Open source also has had a major impact on the enterprise market. When open source started, the debate was whether people would have to pay for software any more and that the license model would go away. What’s really happened is that open source has led to significant reduction in the cost and cycle time to develop new software products. It’s increased innovation in the market. If you are a software developer, you can leverage OS, middleware, network components, database platforms, scripting languages, all from the ecosystem that constantly improves each layer. The cost and time associated to bring the product into the market is shortened. And applications can be offered at a lower cost and still be profitable because the cost of development has gone down fairly significantly. We definitely see the penetration of open source in the enterprise market, and it has increased innovation in the market. MySQL, JBoss, Xensource, and Zimbra are all examples.
The other big theme we see is delivering the notion of improving time to value for a customer. I would encourage any entrepreneur starting a company in the software world to focus on it. The emergence of the software as a service (SaaS) model, whether it is a Salesforce.com, Successfactors, Omniture, or any other platform, when you look at the success of SaaS model, there is a linear correlation between what the customer pays and the value he extracts. Their growth is coming in small and medium sized businesses but the idea of time to value also touches the large enterprises as well. Even in the licensed software model, it’s much harder to get a huge check upfront with a multi year timeframe to get the software up and running. It’s got to be quicker. Any entrepreneur venturing into the enterprise software space should understand this—time to value is the key.
Shomit Ghosh, Venture Partner, OnsetVentures
Lots of new trends today fuel the next generation of application software. For instance, computing is becoming more pervasive. Emerging technologies like RFID, Sensors, Mobile devices, and Biometrics are pushing business logic outside the office. This highly pervasive environment will open up opportunities for software companies to offer new innovative and “pervasive” solutions. In other words, enterprise applications will now need to run on small devices and adhoc networks. Even traditional or legacy software companies can extend their existing solutions to new generation of hardware infrastructure.
Today’s small wireless sensor nodes have enough computing power to perform a whole range of useful functions. Turning those sensors into intelligent information systems would allow customers to realize sizeable revenue opportunities that are not possible under the current wireless sensor architecture paradigm. Towards this end, we have funded Moteiv, a provider of wireless sensor network solutions.
In the pervasive world, data is no more stored in one place and static. It is live and dynamic. How does one solve the challenge of continuous data analysis in high-performance, low-latency decision environments? We have funded Truviso. The company’s software solution processes huge volumes of incoming data to enable continuous analysis, visibility, and action across heterogeneous systems.
In a distributed environment you may need a solution that can sense product and asset movement in a hundred separate locations in a hundred different situations. You need a system that fits in smoothly with your processes and makes workers more productive. You may even have different back end systems to tie in into each location. Blue Vector, one of our portfolio companies, makes rapidly deployable automation platform that makes RFID, barcode, temperature, GPS, and motion sensors to work for businesses.
Also taking cue from what Google has done in terms of making desktop tools ubiquitous, we believe there is great opportunity in taking tools or applications to point devices across the wireless networks.
There are many areas of computing which are still proprietary in nature and are based on closed architectures. This only means that there exist lots of new opportunities for entrepreneurs to build open source applications and penetrate the untapped areas. Of course, this calls for business model innovations too. The license models of MySQL, JBoss, SourceFire, or the recent acquisitions of Zimbra by Yahoo or XenSource by Citix are testimonies to the momentum we see in the open source space.
Sumant Mandal, Managing Director, ClearStone Venture Partners
When Marc Benioff, chairman and CEO of salesforce.com spoke about ’the end of software,’ what he meant was the beginning of a new, disruptive on-demand ’software as a service’ business model. Look at the change in enterprise software’s evolution. Large packages, million dollar contracts, years-long sales cycle, and the professional services implementation are fast becoming yesterday’s business. Today, it is about how innovative your software offering is and not whether it is on an open source or any other technology. The hottest trends are to offer software in an appliance model or the SaaS model.
In the appliance model it is about delivering software in a box. The reason why such box-delivery sells is because it is a discreet unit that has a certain scale and size, matched with easy implementation. Companies like Kazeon have made it plug-and-play once it is implemented in an enterprise. But their selling factors are clean implementation, easy to drop and deliver, while exceptionally discreet in offering. In a SaaS model an application which is business driven can be sold as a service to a business user without the involvement of the IT department.
To pick a few verticals that offer enormous opportunities would be to address virtualization in the software infrastructure space. We have seen the first generation in VMware and XenSource. Now there is definitely a lot to do with virtual machines in software that sit on top of the OS. So software that virtualize applications and software that virtualize computing offer tremendous scope within the data centers.
But importantly, what all entrepreneurs need to do is building a robust business model around their offerings. Think about the economies of business.