I was intrigued by two opposing views coming out of TechCrunch Disrupt this week - one saying that start-ups have an “unfair advantage” in the enterprise market and the other that "tech start-ups needed to find new opportunities away from traditional technology".
"Don’t try to disrupt the redwoods", he told an audience at TechCrunch Disrupt in San Francisco.
The traditional enterprise vendors, after all, are accustomed to slow innovation cycles that’s just not sustainable now that so many consumer trends have infiltrated the enterprise.
- start-ups don't have to go through the usual channels, especially with the SaaS model;
- it's easy to trial new products with the web-native freemium model
- mobile/table brings new expectations;
- the consumerization of IT is real;
- for incumbent enterprise companies, the transition to these new business models is very cost intensive.
I'm on the side of Levie. The transformational effects of cloud, mobile and social are huge, and we generally talk about the impact of that on enterprises and how they function. But it will have an equal impact on enterprise software vendors and their ecosystems.
In this world, at the convergence of these massive forces, I think that the traditional enterprise vendors are particularly vulnerable, in the same way that enterprises which don't transform using cloud, mobile, social are also vulnerable.
The cloud is more than real, but there is still a lot of cloud hype and usually about the irrelevant. I think what is missed is that the cloud isn't something we do things ON, it's something we do things IN. Most of the attention goes to infrastructure which is the doing ON stuff. That's important, and Amazon, Google, Microsoft, Oracle, IBM etc are sorting that out. Once the big things starting happening IN, and we get enterprise Mashups that's when the world starts changing.
It's not just "cost intensive" for the incumbents to move to new models, it's intensive and costly with respect to all their legacy attributes including culture, sales models, remuneration, product line cannibalisation, margins, cash flow, support structures etc. All the usual legacy issues which turn successful companies into potential failed companies.
I think all that is well known, I was just intrigued about the opposing opinions from two smart people. Probably there is something more to David Sack's view that did not come across in the interview.
Enterprise remains an "enormous opportunity" because companies are spending about $500 billion a year with legacy enterprise companies and those budgets are ripe for the plucking. "We believe most will be disrupted in the next decade," he says.