Report: Enterprise to Embrace Web 2.0 as Prices Drop

Ars Technica reports: Social media tools designed for the enterprise are getting all grown up, and a new report from Forrester Research says it's time for a market readjustment. Forrester analysts cite a number of reasons for impending price drops on "enterprise 2.0" tools like software and servers for blogs, wikis, and social networks, but they conclude that only mashup tools are likely to become more valuable.

Three specific reasons are cited for the price drops: commoditization, bundling, and subsumption. Increased competition and slowing innovation means that there is less differentiation between blogging solutions. Further, many vendors, from Microsoft to Six Apart, now offer a complete, enterprise-oriented suites that bundle a mature set of essential tools, which drives down prices for individual tools and specialized solutions.

The last major factor is subsumption, where incumbents are incorporating web 2.0 tools into existing products, like Microsoft has with SharePoint. By building in features like the hosting of blogs and wikis, as well as establishing partnerships with smaller vendors like NewsGator, Microsoft is maintaining SharePoint not only as a market leader, but making it an endpoint on which smaller vendors can build their own products and services.

The tools that are likely to suffer most are those that manage blogs, wikis, widgets, and social networking, with blogging tools falling "to the lowest average cost per enterprise among web 2.0 tools." According to Forrester's report, the space for these is getting crowded with competitors, and blog hosting is also the area that incumbents like SharePoint are cannibalizing the most.

The one enterprise tool that Forrester's report was optimistic about is the software for handling mashups, saying that they are very early in their market cycle and may see price increases: "IT departments will prioritize mashup technology as part of portal, business intelligence, and business process management software investments as well as a major component of SOA implementations." There is a lot of room for mashup technologies to grow, especially into the space for mature, end-to-end products that integrate blogging and social network applications.

Forrester's analysts are certain that the overall enterprise 2.0 market will grow over the next five years as demand increases for ubiquitous information and web-based collaboration tools. That said, we agree with ReadWriteWeb that startups are likely to find new ways to both innovate and integrate with larger products like SharePoint, maintaining their appeal and relevance in an increasingly competitive market.
by David Chartier

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