Monday, April 16, 2012

Request for Startups: An open 'federation layer' for enterprise SaaS users + data

I love Y Combinator founder Paul Graham's "Request for Startup" meme. In that spirit, here's an idea I've been kicking around with a few folks and would love to see happen.

The traditional enterprise software business is crumbling. Once-dominant vendors like HP, SAP and Oracle aren't going away anytime soon, but their iron grip on the minds and wallets of Fortune 100 C-suite residents is weakening daily.

When the New York Times -- not exactly the center of the tech reporting universe -- runs a piece like this one, you can be pretty sure the writing is on the wall.

What's driving this change?

Salesforce gets a ton of credit for setting the pace -- Force.com is the biggest and most vibrant platform and marketplace for cloud-based enterprise apps, and they've made bold acquisitions (e.g,. Heroku) and invested heavily in internal innovation projects (e.g., Chatter) to accelerate their leadership.

But really, monolithic, top-down enterprise software is dying the death of a thousand cuts -- with literally hundreds of agile SaaS vendors targeting thin slices of enterprise functionality, winning over end-users one at a time without ever paying a call on central procurement officers or IT gatekeepers.

This trend has only accelerated with the rise of "smart" mobile devices and the app store model of software distribution. Employees love their iPhones and iPads, and they expect to be able to use them at work as well as at home. BYOD (bring your own device) policies are slowly making their way from consumer-centric enterprises to the most security-conscious strongholds like financial services, cracking open another path into the enterprise for agile software entrepreneurs to wiggle through.

Individual enterprise users love all this beautiful, functional software -- and most SaaS vendors are smart enough to price their services so low that "official" approval channels can't block the purchase.  You can expect this trend not just to continue, but to accelerate, in coming years.

But even the most open-minded and forward-thinking enterprise technology managers have a few very legitimate beefs with the atomized, self-serve future of enterprise IT, including...
  1. Data Fragmentation

    More than ever, data is the lifeblood of any organization -- real-time intelligence about business and financial performance, supply chains and competitive environments is essential to managing cost and risk in a connected age.

    What happens to that unified view of enterprise effort and productivity in a thin-sliced world of SaaS-based point solutions? You get lots of little data silos, big gaps in cross-firm visibility and a steady erosion of management insight and agility.
  2. Security / Authorization / Permissions

    Clunky as they are, monolithic legacy enterprise solutions also help companies manage employee access to sensitive business data -- sometimes just for control reasons, but often for legal/regulatory compliance and customer-facing security commitments that need to be honored.

    Not only can disaggregated enterprise SaaS tools deny the organization a unified / normalized data store, they often also clutter the security and permissions landscape with isolated, opaque access control regimes that create headaches across IT user support, compliance and HR functions.
  3. Human Performance + Innovation

    The "softest" cost of fragmentation in enterprise SaaS is arguably the most important: adding friction to information flows among team members, particularly across organizational boundaries like location, department or line of control.

    Maximizing performance in knowledge-work organization requires the greatest possible transparency into how people's time is being spent, who's working with whom on what, and how potential information gaps might be short-circuited by connecting individuals and teams in disparate parts of the company. Disaggregating enterprise data and workflow tools into departmental silos is virtually guaranteed to reduce total organizational effectiveness.

So, how do we get all the benefits of user-directed, flexible, functional enterprise SaaS without undermining the needs of the organization as a whole?

Microsoft and Salesforce would like enterprise buyers to believe that it can't be done -- that standardizing around Force.com or Sharepoint is the only way to get to the cloud without giving up centralized data, control and transparency.

And it's true that the alternative is both technically daunting to build and equally challenging to drive into market, but I'm not sure that means it can't be done well, and profitably.

I think the enterprise SaaS market is ready for a "T-shaped" offering (or set of offerings) -- one that nails one or two vertical use cases, but also creates a horizontal data, authentication and business intelligence framework that other vendors' tools can plug into. 

Or maybe the horizontal layer can be sold as a standalone -- a "single pane of glass" for senior management to understand how effort, time and key performance data are flowing across the organization, with standardized interfaces that any SaaS vendor who wants to sell into the enterprise must comply with for the expense to be approved. Teams can still purchase any tool they want, as long as it integrates seamlessly with the shared management and data layer.

Some vendors will obviously resist this effort at standardization and -- from a customer perspective -- disintermediation, but I can imagine a group of leading, complementary SaaS vendors banding together to define an open ruleset for in-enterprise interoperability. This "co-opetition" might cost them some degree of horizontal competitive freedom, but would also increase the odds of each of them gaining a stronger foothold in their chosen vertical while also offering a more credible alternative to the dominant horizontal platforms.

Am I nuts? Does this already exist? Let me know!