Hot, Sexy, Beautiful Enterprise Software


enterprise startup

Having spent plenty of years in the enterprise software space, I am fully on board with better-designed and more user-friendly software.  Too many of my own customers experienced immense challenges in getting users to fully adopt these multi-million-dollar software implementations.  Users complained mightily that the software was hard to use, had too many functions, required too many steps or even neglected to fully incorporate critical features.  While many companies were getting value out of these systems, rarely did the resulting return on the investment ever cover the total cost of owning the software.

However, contrary to an article I recently read, the millennial moment will have nothing to do with ushering in the era of better-designed software.  They’ve certainly been a part of a culture change in companies by leading a renaissance of design and by setting records for generational whining, but when it comes to upending the entire infrastructure of the $250 billion enterprise technology market and the IT organizations that support such technology, we need to get back to reality.

It is instructive to see how enterprise software has evolved over the years.  The first applications were built on mainframe systems with interfaces that were optimized for data entry.  Given the limited nature of character-based terminals, it made sense to use odd combinations of function keys (often referred to as PF keys) to speed up various operations.  With the advent of PCs and client/server computing, workplace applications slowly evolved to leverage the newer paradigms of graphical user interfaces, to pointing devices like mice and touchpads and to more end-user flexibility.  When the Internet came onto the scene, these apps migrated to web-based architectures, which lightweight clients accessed anywhere via a browser.  By the early 2000’s, SaaS and cloud computing became all the rage as prognosticators announced the death of old school, stuck-in-the-mud, enterprise software vendors.

Guess what?  Those boring, crotchety, non-innovative and irrelevant enterprise software vendors got bigger.  Software companies such as Oracle, SAP and others are still making money hand over fist selling ugly, nasty-ass software.  They’re helped along by diversified tech companies such as IBM, HP and Cisco, which provide a significant share of software to larger corporations and government agencies.  While it’s true that much of the growth is through acquisitions, the companies that were purchased were selling the same butt-ugly technology.  This technology stack covers business apps such as ERP, CRM and specialized software, to IT infrastructure software for security, networking, monitoring, etc.

And these providers of homely software are here to stay.  They have a virtual chokehold on IT and procurement departments, with licenses and technologies that ensure vendor lock-in for well over a decade.  Why is that?  The buyers are looking for insurance and the sellers are looking for long-term revenue streams.  Buyers are looking to even out costs over time with vendors that are certain to be around for the long haul, and sellers understand that the cost of acquisition requires long-term customer commitments (it’s how they afford those armies of highly paid salespeople).  It’s the classic economics of risk management at play here.

Besides the economic issues, the technologies themselves are horribly complex.  Not because vendors build stuff to be obtuse, but because IT environments and customer requirements create complexity.  For example, an ERP system has numerous stakeholders, thorny regulatory and policy requirements and significant integration needs across an entire company.  Just one of the components of a global ERP rollout, such as payroll*, is enormously complex given all of the local and federal requirements alone in the US, coupled with different compliance issues for every single country.  Once a system is implemented, companies are loath to revisit the decision, even when faced with ghastly and revolting looking software.

All of the examples cited of successful and beautiful enterprise software are lightweights.  Enterproid, Yammer, Box and LogMeIn are mere toys for enterprises that are willing to allow some of these apps to infiltrate at the group level because that’s the nature of large organizations.  However, company standards are still dictated by centralized decision-making groups — not end-users — particularly with technologies that pose security risk, process risk or financial risk.

So what is the state of enterprise software today?  Salesforce recently closed the largest deal ever, which is reported to be nine figures.  If you have ever used Salesforce, the term POS would come to mind, yet they are by all accounts a massive success story with a new way.  What was their brilliant innovation?  Take Siebel but make it Web instead of client/server.  And Siebel’s inspiration to CRM?  Take those fiendish character-based mainframe screens and make them graphical.  So you have a design construct that has not really evolved much since the 1960’s, yet still dominates the way CRM applications, and pretty much all business apps, are built today from a user-interface perspective.

Design really does not play into the decision-making process and the millennials aren’t getting a seat at the table.  The reality is that businesses need to make practical decisions that entail significant costs should they choose wrong.  Design is not overtaking or threatening the enterprise software space.  Vendors aren’t worried one bit as they laugh all the way to the bank.  That’s exactly what Yammer did when it capitulated and sold to Microsoft.  There are no independent SaaS Talent Management apps after IBM scooped up Kenexa (Oracle bought Taleo, SAP bought SuccessFactors, etc.).  There are a billion SaaS CRM companies, yet the only one that has any appreciable market share is Salesforce, and I would not confuse what Salesforce provides with beautiful software.

Software gets chosen by large and mid-sized companies because of an infinite number of reasons.  Design, if it matters at all, is merely a checkbox item.  The selection process usually gets kicked off because the existing software has become a major area of risk (unsupported, vendor out of business, regulatory constraint, significant business change, etc.) or some new hotshot executive wants to make a name for him or herself (the “out with the old, in with the new” syndrome).  Then, a whole laundry list of requirements is drawn up through a cross-disciplinary team to factor in the needs of users, management and IT.  An intensive evaluation takes place testing two or more vendors through various RFP’s, demos and proof-of-concepts.  After whittling down the finalists, purchasing and legal beat the crap out of the final vendors to draw up a final price, software license configuration and term & conditions.  Then, the consulting firm used for the evaluation process picks the vendor most likely to juice their implementation fees, or the winning vendor gets the CIO and his or her cronies an all expense paid trip to the Superbowl.  Feel free to explain how the pretty design is disrupting this process.

Do you really want to disrupt the enterprise software space?  Stop playing by the rules and find new ground.  That means you better disrupt the purchasing madness described above and direct your focus on mobile.  Forget pretty pixels on the            Web, because that ship left the dock a decade ago.  It was called Salesforce and a decade later, they’re still the only SaaS provider in the top 10 of software vendors by revenue.  Think about what processes can be radically streamlined if you simply made the process mobile-friendly.  What if you could plug into the voice recognition API’s of the mobile OS’es and eliminate tedious data entry and updating?  How about building intelligent analysis and delivery engines that suggest or guide work, as opposed to pushing work?  What if you could eliminate even one costly step in a business process because someone could approve or authorize something via mobile?

We have the technologies to easily do this today, and companies are starting to utilize these capabilities.  However, entrepreneurs could greatly accelerate the process and in doing so, build the next generation’s Oracle or SAP.  Just as mainframe to client/server ushered in a new generation of iconic tech companies, we will see the move from desktops to mobile create the third wave of great tech companies.  People thought that the Web would be that leap, but it was merely a stepping-stone in leading to the mobile enterprise.

* Note that payroll is a graveyard for startups, so avoid at all cost.  There is way more promising territory.

This article was originally published on Strong Opinions, a blog by Birch Ventures for the NYC tech startup community.

Image credit: CC by NASA HQ PHOTO

About the author: Mark Birch

Mark is an early stage technology investor and entrepreneur based in NYC. Through Birch Ventures, he works with a portfolio of early stage B2B SaaS technology startups providing both capital and guidance in the areas of marketing, sales, strategic planning and funding.

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