Drivers of the Enterprise Revolution
The fabric of the enterprise is changing. We’re faced with the advent of a new technology stack permeating the operations from a ground infrastructure level all the way up to top-level applications customers and employees interact with. Below I attempt to crystallize some of the main trends that have shaped the enterprise in the last decade and foreshadow the next-generation areas of innovation.
The spark of the enterprise revolution was brought by the rise of the cloud, both in terms of computing infrastructure (AWS EC2), as well as data storage. This gave companies much more flexibility in scaling their technology footprint, allowing them to add capacity at a moment’s notice with a low-asset variable cost structure and without the need to keep expensive staff and hardware in-house. In turn, the rise of the cloud allowed SaaS (Software-as-a-Service) delivered through the cloud to become the de-facto method of software delivery, championed by Salesforce, and gradually overcome many customization, security and latency challenges which favored on-premise software — although innovative companies like Palantir still make very successful inroads into the enterprise with on-premise solutions. A trailblazer promoting cloud adoption of a previously sensitive area is Workday, and HCM (Human Capital Management) in general has seen lots of transition from legacy software to the cloud. The customer benefits of SaaS extend to immediate cost efficiencies (subscription pricing rather than large upfront CAPEX), as well as less customization and on-premise support needed to use the product.
Another key catalyst of the enterprise revolution has been the explosion of data. New software tools have allowed the creation of massive data sets of disparate information, on customers, transactions, product usage or even low-level machine data. This has consisted of a mix of both structured and unstructured data. While for the former existing tools such as MySQL have so far done a reasonable job, the latter asks for the development of an entirely new infrastructure stack. At the foundation level you have tools like MongoDB to leverage NoSQL non-relational databases, or Cloudera for computationally-efficient data analysis; moving higher up the stack tools such as Sumo Logic facilitate the analysis of machine-generated logs; and at the top of the stack tools such as Tableau are empowering non-data scientists to leverage lessons from data through powerful visualizations.
BYOD (Bring Your Own Device) has been a driving force in shaping the type of software the gets used on a day-to-day basis in companies. Employees are bringing tools they love to work with in their spare time back into their workplace, and companies are pressured to accept that in return for more productive and motivated employees. Enterprise software then needs to become more centered on customer experience, to have the product pushed up from the user rather than imposed downwards by the CIO. The potential security challenges of this trend are obvious: more work done outside of the company premises as the lines between workplace and work-from-home get blurrier as well as the collaborative nature of many current tools making information sharing much harder to control. Hence a successful product must excel both in terms of UX and security and empower the employees while also protect the enterprise and navigate the challenging RFP cycle of onboarding startup solutions into a large organization.
While current SaaS valuations in the public markets are raising question marks for some investors, there’s plenty of key areas in enterprise software that are just starting to emerge. For example, recent successes such as Veeva which provides a CRM (Customer Relationship Management) tool for healthcare or innovative products such as RelateIQ which auto-inputs data from multiple sources for a smarter and more user-friendly CRM tool suggest that innovations in an “old” field such as CRM are still plentiful. Other pockets of opportunity are in sectors that have been left behind in the SaaS revolution or which are in dire need of products that are more specialized than horizontal solutions can offer. For example, industries like finance are seeing a need for many back-office processes to transition towards 3rd-party cloud-based solutions and in turn free up human capital costs and remove duplicate work in their operations. And other large sectors such as healthcare or education are seeing similar needs.
The transformation of the enterprise is just beginning, and $4 trillion is essentially up for grabs as the entire IT stack is getting disrupted. These are surely exciting times ahead for entrepreneurs, companies and investors alike.
Thanks go to Jonathan Lehr from Work-Bench for his valuable feedback on this post.
