In an article on TechCrunch Aaron Levie, the founder and CEO of Box.net, details his vision for how enterprise software has historically operated and what will make or break a company in the years to come. The author points out that many IT projects encounter roadblocks, achieve less than forecasted returns, or end up failing; he argues that the business model for enterprise software has favored the software vendor over the enterprise customer.
Levie seeks to address what he perceives as a disconnect between the people who make enterprise software purchasing decisions and the people who use it on a day-to-day basis – the CIO receives proposals and installs software for the firm’s ground-level employees to use. “This has created an oddly perverse dynamic where the vendors with the most feature-rich solutions win the contracts, but the users lose due to the complexity of the technology.”
As Marc Andreessen mentioned, the ability of firms to deploy and serve over the web could prove to be a game changing trend in the software economy; Levie points out that “now that enterprise software can be delivered over the web and iterated quickly, we’re seeing the barriers for development, distribution and adoption shrink to levels previously only witnessed by consumer internet companies.” With user-facing applications or back-end services delivered over the web, “releases often occur on a weekly (or daily) basis … Engineers get to see their projects come to life immediately, and the organization benefits from instant product feedback.”
Levie says the approach of some new enterprise software firms is to build a simple, usable service that achieves a targeted goal or solves a specific pain for a firm’s users, letting the users drive demand for the service up to the CIO. Although the ultimate decision rests with management, users are frequently using the software for their own purposes, at work or in their personal life. The process is almost a reverse-adoption, from bottom to top.
Traditionally, the responsibility for the software changed hands across the table at the same time as the money did. Firms paid money for software and then were given the responsibility of deploying, using and managing it. Upgrades and support may or may not be included. How can the market change so that both parties carry responsibility? Levie responds:
With the new wave of enterprise software companies, customers are no longer solely financially responsible for the victorious implementation of their purchased solutions. The unstoppable trend toward “renting” vs. “buying” software, means the vendor gets paid only as the software continues to solve problems for its customer. As forcing functions go, this is a pretty good one to ensure customers are happy — and it means implementation services, constant feedback loops, and deep customer engagement are all critical to successful retention.
Incumbent companies versus next generation startup rivalry aside, here’s the best news –in the end, the customer wins. In some cases, startup firms delivering value through an iterative web application could be exactly what they need at a price they’re happy to pay. In other cases, the business needs may call for an established history of enterprise software success and a licensed or purchased solution that ties deeply into established systems. Either way, competition and alternative business models ensure better quality and more flexibility at a lower price for the enterprise consumer.
Building an Enterprise Software Company That Doesn’t Suck – by Aaron Levie
Box.net founder Aaron Levie is poised on the edge of startup stardom – by Matthew Lynley