I have been reading many predictions for 2010. There are many great insights. Gartner publishes its annual Predicts Special Report (and the predictions for my team are here - Gartner subscription required). However, instead of focusing on 2010, as we end this decade, I thought I would look back two decades ago, to the end of last decade, look at where we are at today, and then look forward to where things might be in 10 years. These are my personal predictions (not official Gartner predictions).
This is what I remember from 1989:
I had just completed my first client project at Andersen Consulting (now Accenture) providing technical and production support for a M&D GL 3.0 implementation (one of the first ones).
Integrated solutions with a common UI were the big news. Microsoft Windows 3.0 had emerged and there was much talk of leveraging PCs as vendors were in the process of building client/server solutions (SAP R/3 and PeopleSoft most prominently)
The major players at the time were M&D and MSA. In Financial systems, there were other emerging players like Walker Interactive for mainframe-based solutions. In HR systems, we had vendors such as Integral, Tesseract, Genesys on the mainframe with Ross Systems and Infinium with solutions for minicomputers (DEC VAX and System/38 respectively). There was also this German vendor called SAP that was starting to make a push into the US market with the concept called ERP which extended integrated solutions beyond Finance and HR. Oracle provided relational databases and were just starting to dabble in applications. IBM provided hardware (mainframe and minicomputers).
The big discussion in terms of delivery model was mainframe vs. minicomputers.
Applications focused on professional users in Finance and HR. No one really offered self-service applications. Also, at Andersen Consulting, the primary mode of communication was voice mail. Junior folks such as myself did not get (Wang) e-mail accounts
Here is what I remember from 1999:
I was about to leave my first analyst job (at Giga Information Group now part of Forrester) and join a start up. The company (IQ4hire) did not end well, but it was a great learning experience. I would not join Gartner until May 2002.
Y2K and BPR (for those who do not remember - business process reengineering) were the big news. Was anything horrible going to happen to systems when the year 2000 started? BPR was a dream come true for consultants and systems integrators (and did benefit many customers too). Leading up to Y2K, there was an unprecedented buying spree in business applications, as packaged applications became "a quick fix" to the problem. This led to high software license fees and consulting/systems integration billing rates. The leading business application vendors were the JBOPS (J.D. Edwards, Baan, Oracle, PeopleSoft, and SAP).
Something called Application Service Providers (ASPs) were just starting to capture market attention as an alternative model for deploying traditional business applications. You might remember names like Corio (now owned by IBM) and usInternetworking (now owned by AT&T).
There was this parallel track to the ASPs that was emerging at the same time called Software as a Service (SaaS). This was often lumped into the ASP category, but was quite a different animal. Pioneers were in sales force automation (Salesforce.com) and recruiting (BrassRing now owned by Kenexa, RecruitSoft now called Taleo, and Peopleclick).
Comprehensive HR BPO was just getting started as well. Exult (acquired by Hewitt) was pioneering this effort.
If you fast forward to the end of 2009, this is what I see today:
Social media and Enterprise 2.0 are the big news. I will go on record as admitting that I did not predict this in 1999.
From an enterprise software perspective, we now have MISO (Microsoft, IBM, SAP, and Oracle) instead of JBOPS. PeopleSoft acquired J.D. Edwards, then Oracle acquired PeopleSoft, Siebel, and many others. Infor acquired Baan and many others. Microsoft acquired Great Plains, Navision, and Axapta. This decade was the decade of software market consolidation. The discussion has moved from just applications to the entire technology stack. License prices have dropped, but maintenance fees have risen.
Even with market consolidation, there was action around the edges. The ASP model did not have legs (though it has not gone away entirely) and SaaS emerged as a delivery model that allowed organizations to deploy new capabilities targeted at end users without upsetting the apple cart of core systems (and their associated upgrades). The pioneers of 10+ years ago are now mature and growing vendors today. Salesforce.com has over a $1 billion in revenue and Kenexa, SuccessFactors, and Taleo have run rates in excess of $150 million in revenue for Talent Management applications (including recruiting). There are also other major SaaS vendors in a variety of other categories (Concur, Ariba, Ultimate Software) who transitioned from a perpetual license model to SaaS. There are also emerging SaaS enterprise software vendors (such as NetSuite and Workday).
Comprehensive HR BPO fell into the trough of disillusionment as customers struggled with service delivery satisfaction (across the full scope of the contract) and the vendors struggled to profitably deliver the services. It is a cycle we have seen before in IT outsourcing, but there are signs of emergence from the trough.
So, where do I think we will be in business applications at the end of 2019:
Given my track record, I do not know if I have a clue what the "big news" will be. The only guarantee is that there will be something that is "big news". The strongest driver I see out there is all things "social". We know that workforce demographics will be such that it will put stresses on the labor supply. Social technologies will enable access to a greater talent pool at a lower cost than we can imagine today. Traditional organization structures and boundaries will change by 2019 because of this. In addition, the notion of which data is owned by whom will become interesting. Some of the best talent profile data is not in employer HR/Talent Management systems today. It is in social networking solutions such as Facebook and LinkedIn. There is inevitable integration and convergence that will happen by 2019.
One of the MISO will no longer exist as an independent entity if history is a judge. Consolidation will continue. At least one new vendor will join the elite enterprise software group. At this point, Salesforce.com would be the favorite, but as a publicly-traded vendor it does not entirely hold its destiny in its own hands (as Oracle's acquisition of PeopleSoft demonstrated in this decade). Don't be surprised if it is a vendor that is not a player in business applications today (for example, Google).
Vendors that sell perpetual licenses will move to subscription license models to keep the maintenance gravy train rolling (combining license and maintenance fees so customers cannot opt out of maintenance easily and move to third party support providers).
SaaS will be the mainstream delivery model. This is not a hard prediction as I have not seen a new vendor emerge or get funded in the last three to four years that did not leverage the SaaS model. However, I will predict that there will be a second $1 billion in revenue SaaS vendor and at least three more SaaS vendors between $500 million and $1 billion in revenue by the end of 2019.
Alternative business models will emerge as well. Open source solutions already exist, but the "Freemium" model and ad-based model will likely have an impact on business application business models by the end of the next decade.
Comprehensive HR BPO, aided by SaaS solutions, hits the plateau of productivity as providers learn how to deliver their services consistently, but margins get squeezed. Vendors used to providing services on tight margins have the greatest success.
What do you think? Am I way too far out on a limb? Not far enough? What do you see happening by 2020?
I was going to write something similar for different reasons. I think HR organizations are intrigued by social media, know they should do something about it, but do not really know what. In the discussions I have with clients, it rarely comes up (only for sourcing in recruiting). I know others at Gartner take calls on it, but if HR and HRIT organizations were that focused on it, I would think it would show up a lot more. Ok, I am ready for the luddite label.
Naomi Bloom's recent posts (here and here) on scripted scenarios were a good memory jog to write this post. I have thought a fair amount recently about the business application software selection process and I think it is going to change significantly over the next few years. First, let me say that scripted scenarios are not going to go away - the vendor demos will.
Consider the following scenario. Let's say you were going to buy a car and you were unsure which car to buy. Maybe there are three or four that are in the size and price range you want (your short list, if you will). You would likely go to dealers for each car and do a test drive. You would get behind the wheel and drive the car and get a feel for how it operates and what you like and do not like (or would like to change depending on the options) about the car.
Now, let's think about it how it would work if a car test drive was like selecting business applications. In this case, you would have the car salesperson drive (demo) the car for you while you sat in the passenger seat and asked questions. You could have each car salesperson drive the car along the same route (scripted scenarios) to see how each car handles the course you have outlined. You would be able to compare "apples to apples" and probably gain some insight into what differentiates each car in terms of the driving experience. However, you would not really know how well the car you select drives until you actually buy it and drive it home from the lot.
It sounds sort of ridiculous when put this way, but this is exactly how most organizations buy business applications today (and have for many years). The emergence of SaaS and Cloud Computing is going to change that. It will literally put the customer in the driver seat. Instead of vendors doing scripted scenario-based demos, I see vendors setting up "sandboxes" where customers can run their own scripted scenarios with coaching and assistance from the vendors as needed. Pretty much every vendor in the market today has a SaaS or hosted offering. So, there is no reason that vendors cannot set up these customer "sandboxes". Also, cloud computing infrastructure will help make it more economical because vendors will be able to scale their compute resources up and down based on demand.
Old ways die hard. Am I way off base? Is it too much work, too difficult, or does it take too much time to do a proper test drive of business applications? What do you think?
Important post about Social Recruiting. It starts to get at the nuance that the differentiators of vendors in this area are not transactional activities (like posting jobs). It is leveraging the data collected about sourcing and relationships to do a more effective job.
A fantastic example of why good talent management systems are not enough for successful talent management. If managers do not care enough to provide meaningful feedback to employees, it does not matter how good your process or data collection may be.