This was also posted at buzzient.com/blog
For those of us brought up in the enterprise software (#EnSW) era, it’s been a long time coming. Ever since the emergence of B2C commerce, many of us have had to take a back seat to sketchy online consumer businesses which, though they make our lives better, are not necessarily feats of engineering or substantive importance to corporations, big businesses. Remember online dog food ordering? You get what I mean.
After the dot-com crash, there was a glimmer of hope for us enterprise software folks. As consumer internet investing seemed to be going the way of the platypus, companies such as Salesforce.com, Successfactors, and NetSuite emerged with internet-delivered business software which served the needs of fast-moving young gazelle companies as well as maverick departments inside larger enterprises. These Software-as-a-Service (SaaS) pioneers blended the best of the internet boom with the pragmatic problem solving required of enterprise solutions.
However, the re-emergence of the enterprise began to be overshadowed in 2003 by something new: Web 2.0 and social networks. All of a sudden, it seemed like the world took a great step backwards to 1999, as companies just needed to add a “-ster” or “-ly” to their name in order to raise capital and capture mindshare. Just type a few words into your Web 2.0 name generator and you were on your way: Web 2.0 Name Generator
Some of these companies were legit innovators and eventually market leaders. Many were not, but collectively they served to reinforce the notion that software had evolved away from being hard and difficult to build and deploy to being a gossamer, effortless use of a few open source libraries and some scripting. That the real purpose of software was to power consumer or small-medium sized business (SMB) interests and not cater to the needs of larger enterprises.
Many venture capital investors loudly proclaimed that the “Enterprise was Dead!” and they "wouldn’t invest in any company which required a business decision maker to be involved". Any investable company had to be tailored to the needs of the SMB user, someone willing to swipe a credit card for a few dollars to bring your product into their sole proprietorship, or into their cubicle, bypassing the scrutiny of the CIO.
Things have changed, though. In the last six months, there has been a resurgence of interest in big company software, particularly around managing unstructured social data and customer experience management. It’s as if investors, analysts, entrepreneurs, and even consumers have woken up and realized that there must be more to high tech than yet another photo-sharing social site which enables me to text my feelings to my followers and their puppies (or something like that).
What I’d like to highlight is that during this long nuclear winter for Enterprise Software, during these multiple head-fakes where it looked like the world would turn serious again, then blinked and went all consumer Web 2.0-y on us, that real enterprise software companies kept chugging along and building value. The SaaS upstarts previously mentioned continued to grow, and ultimately went public with market caps in the Billions. At the same time, a next wave of enterprise software companies emerged which resisted the urge to go consumer and are now poised to lead a new “golden generation” of business software. Jive, Marketo, Lithium, at the application layer, as well as others such as Vertica, Splunk, Cloudera and Couchbase pioneering Big Data.
Of all the new players though, the one that stands out in my opinion as epitomizing the "Rebirth of Enterprise Software" is Workday.
If there's any proof that yes, you CAN go home again, it's Workday. Workday provides cloud-based Human Capital Management (HCM) software for running payroll, recruiting, and general financial management. For those who don't know, Workday is the reincarnation of PeopleSoft. PeopleSoft, which was acquired by Oracle for $10B in 2005 after a hostile takeover by Oracle, was known as one of the best companies to work for in software.
Founded by Ken Morris and David A. Duffield ("DAD") in 1987, PeopleSoft came to the fore as an innovator for a number of reasons:
- Culture: PeopleSoft had a unique culture for the software industry of the late '80s. As opposed to what was then the slash-and-burn culture of many fast growth players of the time, where customers were left holding the bag on uncompleted products and employees churned at a high rate, PeopleSoft was extremely popular with both customers and employees. A lot of this came right down to the founder, who treated both constituencies like family.
- Tools: PeopleSoft's products were designed for HR management, but one of the keys to their success was their easy to use, web-based toolset which enabled end users to configure and change the look and feel of departmental applications. In this respect, PeopleSoft foresaw the movement towards more consumer-driven UI design vs. the tradition vendor-centric UI approach.
- Location: By locating in the more bucolic settings of Pleasanton, in the SF East Bay's 680 corridor, PeopleSoft was able to establish a virtual lock on recruiting from a number of talent pools: UC Berkeley and Lawrence Livermore National Lab to name a few. Basically, any strong technology person who preferred the East Bay to the Peninsula for family, lifestyle, or weather reasons would have considered PeopleSoft. This talent pool enabled PeopleSoft to compete head to head with Oracle, SAP and other much larger companies for years, and finally culminated in Oracle having to make a hostile bid in order to enter the HCM market.
When pushed out by Oracle after the acquisition of PeopleSoft, Duffield could have just put his heels up and relaxed. Already extremely wealthy and with nothing left to prove, he could have devoted the bulk of his time to his already considerable philanthropy efforts. Instead, he and former PeopleSoft executive Aneel Bhusri started Workday a scant two months after the acquisition of PeopleSoft. By timing their recruitment of their old team to the expiration of non-competes and non-solicitation agreements they were able to successfully "put the band back together". And customers? Customers fell over themselves to do business with the new company taking HCM to the cloud. In a scant seven years, Workday grew from idea to IPO and market cap of over $8 Billion. Oh, and the deals they do? Straight up enterprise subscriptions with average sales price of over $400,000. Not something that would be put on a credit card. In fact, it smells like enterprise software to me, and that sort of growth and deal size is sexy as hell.