Perspectives on Innovation and Enterprise Computing Timothy B

Overview • • • Background Observed trends Market Dynamics Implications for Software Infrastructure Business

Background • Who is Tim Jones? – Education • MIT ²: B. S. , Sloan Fellow (MBA); Georgia State M. S. Computer Information Sys. – Business Development, Channel and International Sales experience • Oracle, Sybase, Open. Vision • Executive Leadership w/ On. Demand, Eba Systems, Bion. TTech – Early Stage Venture experience w/ Mohr, Davidow Ventures on East Coast • Core Competencies – Enterprise Software, Middleware, and Infrastructure – Internet Applications – Wireless Applications – Network and Homeland Security Infrastructure © 2007 MIT Sloan School of Management

Innovation and The Fifth Wave Source: Carlota Perez, 2002 © 2007 MIT Sloan School

Where IS innovation occurring? • Since 2000 (i. e. Frenzy), more innovation has occurred in consumer technology than enterprise technology – Google for internet search vs. Verity (10 years old) – Apple IPod, as music player AND storage device – Gaming Platforms driving processor, user interface, and network development • X 86 commoditization, NVIDIA, AMD • Second Life, Worlds of Warcraft • These shifts in the locus of innovation from enterprise to consumer markets have led to significant disruptions that create business opportunities © 2007 MIT Sloan School of Management

Disruption #1: Prosumers in the Enterprise • • • Educated, professional consumers, or “prosumers” are bringing consumer technology into the office as alternatives to corporate solutions – Better interfaces, more user centric – Higher productivity – Lower cost! (10 X factor) This happened before: – Apple II vs. Mainframes and Minis – Visi. Calc and Lotus 123 vs. OEM financial applications – Netscape Mozilla vs. 3 GL/4 GL applications • Anybody remember the “Intranet”? ? ? CIO’s are increasingly having to manage new devices and applications that are “home grown” © 2007 MIT Sloan School of Management

Disruption #2: The new software stack • • • In addition to the management problem, a new hybrid class of applications, based on the low cost “LAMP” stack is undermining existing enterprise software – Carr’s “Death of IT” is overblown, but this IS a threat to existing vendors dependent on high margin information goods Despite Carr’s pessimism new applications are emerging that enhance productivity in knowledge workers – Brynjolfsson’s “Scale without Mass” and IT intensity Characteristics of these applications include – “Pull” vs. “Push” orientation • Driven by real-time user needs not vendor designs – Customer Self Service orientation vs. Central IT Planning – “Good Enough” computing contrast with serialized release process • The “Perpetual Beta” © 2007 MIT Sloan School of Management

Redefining the software stack Mobile and Wireless Perl/PHP Web Applications Enterprise Applications My. SQL Small-Medium Business Applications Apache Service Layer Database Operating System Linux © 2007 MIT Sloan School of Management

Good Enough Computing leverages the new stack Mobile and Wireless Agile Development methodology: Develop a Vertical “Slice” of the complete stack, then release to customers for acceptance Multiple Slices enable fast, constant releases and ensure compatibility with previous releases => The “Perpetual Beta” Web Applications Enterprise Applications Small-Medium Business Applications Service Layer Database Operating System R 1 R 2 R 3 © 2007 MIT Sloan School of Management

The “Long Tail” of Enterprise Computing Source: Rod Boothby, 2006 © 2007 MIT Sloan

Evolution of the Long Tail in the Enterprise Source: Rod Boothby, 2006 © 2007

“Long Tail” + Disruptions #1 & #2 lead to Enterprise 2. 0 Source: Rod

Enterprise 2. 0 Definition • Utilization of 2 nd Generation Internet technologies inside the enterprise firewall to – Enhance collaboration, “tacit” interactions and user-generated content to solve problems below the threshold of traditional IT – Replace client server architecture with more flexible, user-centric applications and access to data – Improve intra-enterprise communications and processes in real time at low cost (Inside the Firewall, “IFW”) – Facilitate inter-enterprise transactions between supply chain and channel partners with heterogeneous IT infrastructure (Outside the Firewall, “OFW”) – Engage customers and partners more fully by increasing integration with their data and applications (OFWⁿ) – L³CAT – Long Lived Loosely Coupled Asynchronous Transactions © 2007 MIT Sloan School of Management

Deployment/Synergy - beginning of the Enterprise 2. 0 era Source: Carlota Perez, 2002 ©

Enterprise 2. 0 Software Model The Enterprise is the market “white-space” where web 2. 0 technologies have not yet been fully utilized Source: Dion Hinchcliffe, 2006 © 2007 MIT Sloan School of Management

The Enterprise IS Content, too! • Consumer Content – HTML Pages – Music – Video – Structured links • Enterprise Content – Applications – Database information – Unstructured Content © 2007 MIT Sloan School of Management

New Software Model reflects needs of more fluid IT Integration Source: Adobe, Inc. ©

Anatomy of New Software Models © 2007 MIT Sloan School of Management

Enterprise 2. 0 and Coase • The fluid, flexible nature of Enterprise 2. 0 confronts Coase(1937) on the nature of the firm => reduction of transaction costs External Firms Firewall External Firms Core activities External Firms © 2007 MIT Sloan School of Management

Enterprise 2. 0 Core Components • SLATES (Mc. Afee 2006) – Search – Links (e. g. . Clustering IFW) – Authoring (Blogs, Wikis) – Tags (Taxonomies and “Folksonomies”) – Extensions (Recommenders) – Signals (RSS) © 2007 MIT Sloan School of Management

Early Adopter Organizations • • Dr. KW Razorfish Li & Fung UPS © 2007

Target Verticals • • Financial Services – Asset management – Retail Customer Self-Service Consulting and Professional Services High Technology – Sales, Support, and Marketing – Channel Management – Distributed Product Design – Outsourcing/Offshoring Project Management Pharmaceuticals/Life Sciences – Health Care feedback loop – Distributed Sales forces © 2007 MIT Sloan School of Management

Channel Trumps Product • Direct Sales must be augmented and extended to be profitable • Web/Internet Channels are required • The Data Center is a Channel as well – The “One Building Company” • Esp. w/SW Appliance © 2007 MIT Sloan School of Management

Possible Market Segmentations: End User Type (1) • Highly mobile professionals – – – • Work frequently outside of the office High communication frequency Expert PC user Use broad range of software products Examples: executives, consultants Office-based knowledge workers – – – Work primarily in an office High communication frequency Expert PC user Use broad range of software products Examples: engineers, analysts © 2007 MIT Sloan School of Management

Possible Market Segmentations: End User Type (2) • Task-oriented office workers – – – • Work primarily in an office Medium communication frequency Advanced PC user Use smaller range of software products Examples: administrators, accountants Task-oriented non-office workers – Work in manufacturing, logistics etc. , i. e. not typically in an office, but at a fixed work place – Low to medium communication frequency – Less experienced to advanced PC user – Use small range of software products – Example: bank tellers, factory workers © 2007 MIT Sloan School of Management

Possible Market Segmentations: End User Type (3) • Highly mobile task-oriented worker – Work mostly outside of the office – Medium communication frequency – Advanced PC user – Use small range of software products – Examples: field service technicians © 2007 MIT Sloan School of Management

Deployment Models: Adoption of Software as a Service (Saa. S)? Adoption by Company Size Saa. S Adoption Small Mid Enterprise Currently Use 36% 30% 31% Evaluating 16% 13% 11% Plan to Evaluate 15% 20% 17% Familiar, No Plans 18% 29% Evaluated, Didn’t Buy 5% 3% 7% Discontinued 2% 0% 0% Not Familiar 8% 5% 7% Adoption by Application Type (all companies) Approx. 43% of big Enterprises have no plans to use Software-as-a-service and are therefore potential customers for an installed solution. © 2007 MIT Sloan School of Management Source: Summit Strategies, Saugatuck Technologies

Other Deployment Models • Hardware Appliance – Commodity hardware(x 86) and Software(Linux) • Akamai, Google Search Appliance • Software/virtual Appliance – Software emulation of hardware container • r. Path, Vm. Ware, Ingres 2006 – Possible Integration with Cassatt © 2007 MIT Sloan School of Management

Enterprise 2. 0 Segmentation by End User High Typical complexity of computing tasks Low Office-based knowledge workers Task-oriented office workers Self-directed Innovators Students/ educators Highly mobile task-oriented workers Task-oriented non-office workers Low Highly mobile professionals Mobility High Source: Goeldi, Jones, Lo, 2006 © 2007 MIT Sloan School of Management

Enterprise 2. 0 End User Segmentation for Web-based Applications High Office-based knowledge workers Self-directed Innovators Expected development Typical complexity of computing tasks Low Task-oriented office workers Highly mobile professionals Students/ educators Highly mobile task-oriented workers Current positioning for web-based Task-oriented applications non-office workers Low Mobility High Source: Goeldi, Jones, Lo, 2006 © 2007 MIT Sloan School of Management

Addressable Application Spaces Human Resources (HRMS), Human Capital Management; (Peopletools replacement) Supply Chain Management (SCM) Enterprise Resource Planning (ERP) Knowledge Management (KM) Enterprise Applications Integration (EAI) Project Management Procurement Logistics and Distribution Marketing Management (Product/Corporate) Risk Management and Compliance Production Planning and Materials Management Business Intelligence (BI) (esp. Real Time vs. Offline) © 2007 MIT Sloan School of Management

Example: Knowledge Management in Venture Capital New investment environment requires interdisciplinary investing New Environment Traditional VC Investing Wireless Security Software Biotechnology Chips/Devices Physical Security Source: Jones, 2005 © 2007 MIT Sloan School of Management

Real time integration of Knowledge Content better suited for Enterprise 2. 0 Email/ Phone

How to ramp an Enterprise 2. 0 Company • Option 1: M&A of players in KM/BI/enterprise search built during last wave that are undervalued – Public Companies • Autonomy – Private Companies • FAST Search • Endeca • Vivisimo – Advantage: Build a cash flow generating, sustaining business quickly • Option 2: Early Stage Venture route – Develop the killer app for the emerging market – Advantage: Do one thing REALLY Well • Option 3: Develop the Systems/Network management infrastructure – Use Open Source/LAMP (Open. NMS) • Option 4: Develop/Acquire the Software/Appliance infrastructure © 2007 MIT Sloan School of Management