Most of the innovation in web services over the past three to four years (what is popularly known as web 2.0) has been focused on the end user as the customer. We call them consumer facing web services in our firm and they include the services from Yahoo! and Google, blogging tools like WordPress, Six Apart, Live Journal, Blogger, social networks like MySpace, Facebook, Tribe, LinkedIn, tagging services like Delicious and Furl, photo and video sharing services like Flickr and YouTube, attention aggregators like Digg and Memeorandum, wikis like Wikipedia and Wikicities, and countless other web native services.
These services are changing the way that we use the web to collect information, organize it, republish it, and extend it. I suppose you could say its a revolution in consumer knowledge management.
Which leads to me to the office or the “enterprise”.
Esther Dyson observed in a Release 1.0 issue in 2004 (well before web 2.0 was upon us) that it used to be that technology would start with the goverment (military or space), then move to the enterprise, and end up in the consumer’s hands. But, she said, these days technology starts with the consumer and moves up to the enterprise.
So we think its time for the developers of web services to start thinking about the enterprise. And we are not alone. Nicholas Carr wrote a post yesterday wondering if Web 2.0 is “enterprise ready”. In that post, Nicholas links to an article in MIT/Sloan’s Management Review by Harvard Business School professor Andrew McAfee, called Enterprise 2.0: The Dawn of Emergent Collaboration.
In that article Professor McAfeee argues that web 2.0 technologies like blogs, wikis, and group messaging services are perfect for “spontaneous, knowledge-based collaboration”.
We agree and we have made one investment to date around this theme, in a company called Instant Information that has built a web service featuring many of the most used web 2.0 technologies and techniques, such as RSS, tagging, blogging, wikis, social networking, and information sharing. The service is called TouchPoint and is focused on the needs of the wall street investment professional.
We hope to make a number of additional investments in enterprise focused web services. We can learn from what has worked to date with consumers and incorporate those lessons into the design of useful services for enterprises.
You might ask why won’t the services that work for consumers today just end up in the enterprise. We think they will. Certainly we have adopted blogging on the Union Square Ventures website. We use delicious to share links, we use a jotspot wiki to keep track of all of our deal flow and our investments. We use social networks like LinkedIn to find candidates for our portfolio companies. In short, we run our business on web services and we are certain that many other enterprises are doing the same.
But there are times when a service that is ideal for a consumer doesn’t work perfectly for an enterprise or a particular industry. In the case of Instant Information, they have added concepts like permissioning and entitlements to TouchPoint so that the wall street investment professional can participate in the sharing of research and other information while maintaining their business model and industry practices.
And then there is the issue of the business model for the web service. Most web services use the Freemium business model in one way or another.
Many enteprises will be more comfortable with a monthly payment than an advertising supported service. We still think a free component of the business model is critical to get widespread adoption among enterprises. We think many of these services will be brought into the enterprise by one employee or a small group and then spread virally. So freemium is still a good way to go when approaching the enterprise with a web service.
If you are building a company that is building or marketing a web service focused on enterprises, we’d certainly like to hear from you.