October 12, 2006

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Enterprise 2.0: Trendy term, real revolution

by Jonathan Opp

In web time, the term "2.0" is 1.0. Introduced by O'Reilly in 2004, the "Web 2.0" concept has covered a lot of distance. It wasn't long before it was applied to just about everything that was considered novel and innovative. If it was new, it was 2.0.

In fact, using the term "Web 2.0" was banned among a group of Red Hat engineers at least a year ago. Part of the reason why is because the web is in a perpetual state of 1.0. It's never finished. Perhaps the most lasting metaphor for the web is the "under construction" shovel man, imprisoned in a repeating animated gif, digging for all eternity. Sisyphus 2.0

Web 2.0 became the code word for web technology that turns much of the control and content production over to the community. It allows users to organize content in ways that are most useful for them. It assembles and disassembles based on the needs of the moment. O'Reilly compares Web 1.0 and 2.0 and one of the great examples they use: It's the difference between publishing and participation.

Tim O'Reilly defended the term in his blog last year: "Perhaps I'm biased, because O'Reilly was the source and has been one of the biggest promoters of the Web 2.0 meme, but I think it captures exactly where we are at this moment: a widespread awakening to the fact that the game has changed."

Events this year have proven that it certainly has.

Choose your own favorite Web 2.0 example. Maybe Google's pervasive search capability. The creativity and community around video production on YouTube. Or the ability to reorganize content entirely as you want using a combination of RSS feeds and a newsreader (why visit websites when you can assemble your own?) Digg.com, Del.icio.us, Technorati, the list goes on.

But that's the idea: All of us are smarter than one of us. What O'Reilly calls "leveraging collective intelligence." Web 2.0 is about building the tools that create this environment.

The web blazed the path. Now large organizations are finally starting to follow.

Enter Enterprise 2.0

The term Enterprise 2.0 was coined by Andrew McAffee, an associate professor at Harvard Business School in Spring 2006. You can read McAffee's article that was published in the MIT Sloan Management Review by purchasing the pdf for $6.50. (Which frankly doesn't sound very 2.0 to me, but we'll let it go.)

Essentially enterprises are beginning to take the best of web 2.0--both technology and philosophy--and applying it to their business.

Before we go any further, now is a good time to mention another unfortunate characteristic of the modern organization--the mindshare landgrab that is intellectual property. The name "Enterprise 2.0" has actually been copyrighted. According to its Wikipedia entry: "Enterprise 2.0" is a U.S. Service Mark (serial number: 78893454), owned by Chang, Alvin K, at Birch Ct. Oakland, CA 94618. It was filed on May 25, 2006 and seems to apply to the fields of business and educational conferences and provision of educational services related to Enterprise 2.0."

That doesn't sound like 2.0 either.

Semantics aside, there is something real going on here. It was only a matter of time before large organizations began to use technology like social networking, blogs, and wikis to share and collaborate. They're taking advantage of these tools to collect knowledge. And using these technologies to exchange information with their customers in real time.

Some argue that taking advantage of the speed and collaborative power of the web is good. Others might say it's only a good start.

It's also the ability to create applications that provide service on demand. To apply technology like virtualization to create a more flexible and efficient use of IT infrastructure. And using open source software because of the attractive economics of the model and freedom from restrictive licensing.

Expanding the definition

One individual already looking beyond the current definition of Enterprise 2.0 is Vinnie Mirchandani.

Mirchandani is a former Gartner analyst and former systems integrator for PriceWaterhouseCoopers. Today he's a consultant brokering deals between his CIO clients and large, mostly proprietary software vendors. He describes his day job as "beating up on vendors" because of their economics.

"I'm very hard on the proprietary vendors," he says.

Mirchandani has been blogging for 18 months, currently writing two blogs, the first, Deal Architect and the other New Florence, New Renaissance.

It was through his Deal Architect blog where Mirchandani first questioned the definition of Enterprise 2.0 as it was offered. He noticed that the social networking, Web 2.0 segment of the market was saying the enterprise needed to adopt these technologies, and that this is what Enterprise 2.0 looks like. But Mirchandani believes they are only one aspect of the enterprise.

He believes CIOs are watching Web 2.0 and will need the innovations it creates. "But they're just as interested in what's going on in middleware, just as interested in what's going on in sensors, RFID, and just as interested in how mobile applications are going to change our world. They've got a portfolio of innovations they're looking at, and to me, any definition of Enterprise 2.0 has to be comprehensive."

He noticed something else, too.

"There's so much broken in the incumbent delivery model, the incumbent licensing model, the incumbent systems integration ecosystem, and so on." he says. "If you're going to redefine Enterprise 2.0, the next version of the enterprise, how can we accept all the bad practices from Enterprise 1.0? We have to start using more communities. We have to start moving to a different model of licensing. We have to start using more software as a service, etc."

In his blog, Mirchandani alludes to Steve Austin, the Six Million Dollar Man.

"This is almost like a once-in-a-lifetime opportunity," he says. "Steve Austin had a nasty accident, he almost died. We could fix his nose, but we have an opportunity here. To fix not just his nose but also add nuclear implants and so on. We have an opportunity to create the bionic enterprise."

It's a concept that involves more than just adopting individual elements of Web 2.0, but a broader view. "It's a small subset of what the enterprise needs to take into account."

In his blog he posted a list of those characteristics, including supporting choice, providing a broad ecosystem of partners, promoting sharing, and supporting open sourcing of community intellectual property.

"Open source reflects a fresh new way of telling the world, 'we need to make money to stay in business. We can make it through services, post-implementation add-ons, and so on.'" he says. "What we don't want is a model where 95% margins on maintenance are accepted."

"Here we talk about how the software industry has matured. But we still warrant almost predatory pricing. To me open source reflects a mindset of reasonable, fair pricing."

Mirchandani says he frequently uses Southwest Airlines as an example, not because they're always the cheapest, but because they don't have yo-yo pricing and won't nickel and dime you for peanuts. It's a much fairer approach to doing business, he says.

"That's I find attractive about some of the open source community."

Two other important aspects of this new vision of the enterprise are transparency and collaboration.

"If you truly believe in your customers, you can't build walls around you," he says.

Mirchandani mentions the website Salesforce.com built after they'd experienced some outages to show their metrics like uptime. "I think that's fantastic. Why hide it from your customers?"

According to Mirchandani, they've also introduced a way to to poll customers about new features, using the online user community for feedback. "Clearly every software company gets some input from its customers. But what a neat way to encourage more and more customer input. It doesn't mean you have to take all of the input, but it's breaking down the walls between you and the customer."

At the same time, the customer community also has to step forward, he says, becoming more willing to share information on blogs and speak openly, rather than sitting back and criticizing one vendor over another.

Mirchandani's other blog, New Florence, New Renaissance, was created in response to the bleak world of the incumbent enterprise software model. He started to look at what was happening around Web 2.0 in California, mobile applications in Korea, Business Process Outsourcing in India, manufacturing efficiencies in China, and what was happening in open source, he says.

"I stepped back and I said this is exactly like Florence was in the Dark Ages. We're just about to step out of the Dark Ages into the Renaissance world. It's not as simple as turn the light on and the Renaissance happens, but the transition is almost similar."

He says that most of his CIO clients are waking up to the fact that 80% of their spend is going to 20 vendors, and it's mostly locked-in pricing.

"So they're more ready to listen to open source conversations, software-as-a-service conversations--how little innovations can help them squeeze that cost, how innovations can help them become better responsive to their own businesspeople."

"I think Enterprise 2.0 to me, if you don't define it narrowly, is this recognition that business technology is so maligned at this point, and it's so low payback." he says. "We have a chance to get out of the Dark Ages and get into the new Florence here."

How then is the best way for enterprises to get started?

He suggests teaching should start at the CIO level. "Open source is one innovation that CIOs need to just say, 'yes, I need more.' That's one change."

He also says that CIOs need to understand that the Web 2.0 phenomenon is not just MySpace and Facebook. Collaboration, transparency, social networking are important. That it takes a much more open CIO to start taking advantage of this bounty, but gradually it's happening.

"You have to be frustrated with living in the Dark Ages." he says. "If you're happy living in the Dark Ages, nothing can change."

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