Are enterprise software vendors becoming the new telephone companies of the cloud computing age?

Posted on February 22, 2012


Talking with an ever increasing number of both new as well as long established software/ERP vendors within the context of the cloud and the accelerated mobile reality of conducting business in a global marketplace, an interesting trend is emerging in terms of how these organizations are coming to a proverbial fork in the road relative to their corporate mandate.

On the one hand you  have those vendors who are focusing on bolstering their present back-end or core enterprise applications to accommodate the anytime, anywhere accessibility of their solution to a rapidly expanding and diverse list of users through linking apps, in which there is no longer a single gateway through say the IT department.  In short, these companies are adapting to the changing market so that in key areas such as business intelligence users can grab and manipulate their enterprise solution’s back-end data to help them to make the best decisions at that particular point in time while still adhering to their company’s overall strategic direction and imperatives.

However, and what is most interesting is the number of vendors who are choosing the road less taken or traveled in that they have recognized the fact that the “we’ve got an app for that” generation of linking solutions do not require the significant investment of the traditional software development model relative to personnel expertise and cost.  In fact, it is the realization that some of the most robust applications are actually being developed by smaller in some cases one or two person shops, that has led the smarter vendors to pursue what I call the ubiquitous utility strategy whereby they become the facilitating platform that connects users to an impressive array of solutions through a managed “App Store.”

Think of it this way, and in much the same fashion that the telephone company connects one person to another, the new utility vendors are connecting users in the same fluid fashion to their growing stable of apps, and in the process earning revenue for serving as the facilitator.

Of course some of these apps are “self-published” meaning that the enterprise vendor is fulfilling the dual role of being both facilitator and linking app provider.  However, and citing the aforementioned streamlined creative process, it makes far more sense to attract third-party solution developers whose strategic focus uniquely equips them to create a specific linking application, with the role of the enterprise vendor changing to one of relationship and utility platform management.

For ERP vendors taking a proactive role as the utility platform provider it is an important move in that it will help to add functional connectivity to their existing enterprise installation base, which for most is still a critical foundation for their business’ existing revenue model . . . at least for the immediate future.  Ultimately, the bulk of their revenue may very well be derived from their utility platform/app store management role versus enterprise solution licensing and maintenance fees.

What is particularly noteworthy about this development is that ERP vendors actually have no choice but to pursue the utility strategy, as some companies such as Rosslyn Analytics have already demonstrated that you do not, through these linking applications, need either permission nor cooperation from the enterprise solution vendors to access back-end company data.  As an end user you simply have to have access to the app store with the right solutions to gain almost instant access to the tools that will have a profound and immediate impact on your bottom line.  If you wonder what these app stores look like, here is the link to just one of them;

So what does all this really mean?

To start assimilation-oriented vendors such as an Oracle, who like the PC vendors of yesteryear that pursued a proprietary technological platform, the future is likely going to be very bleak unless they get in the game by acknowledging the fact that the golden days of the ERP vendor are indeed a thing of the past.  More specifically, and even though these overarching back-end solutions will likely have at least a shadowed presence for some time to come, they will no longer be used as the central launching pad for outward facing end-user engagement and development.  In essence ERP applications will become a centralized and somewhat passive repository based predominantly on their historic pervasiveness.  While these back-end enterprise solutions will still generate revenue, it certainly won’t come close to the amounts that were collected in the past.

As the primary focus of end-user clients will shift to employee and customer convenience, it is the app store’s stable of linking apps that will become the true measurement of success and influence in the vendor world.

Those vendors who recognize this and move towards providing a ubiquitous utility platform that serves as the gateway to a well stocked app store will be the ones to emerge as the new dominant players in the market.