Distribution is the New “Ecosystem Play”

How many times have you heard the traditional enterprise software vendors talk about their ecosystems? "We have 450 partners building apps on our platform" as if the fact that a lot of vendors had signed up for a partner program is not only proxy for success but absolute proof.

The other aspect of this is that it’s a viewpoint stuck in time, back when the barrier to entry a software developer faced was the cost of the components required to build their application. In other words, when an app server and a message bus were expensive it made sense to piggyback on someone else’s investment, but can the same be said today when the most significant cost a company faces is sales and marketing?

No, and without access to a customer base and a low cost route to prospects then most large vendor programs simply don’t resonate with high growth startups today. The traditional platform vendors still think about platforms as a set of technologies.

Even Salesforce’s much talked about Appexchange and Apex lacks a mechanism for virally spreading to new users. If the best they can offer is that someone who already knows what they want can go to Appexchange and find something that is a match, then how can it be anything but a more slippery software retail storefront? At what point in my SFdC customer experience do I find out what other people like me are using, without me asking for it?

Where I am going with this was revealed last week when I wrote a short post about Facebook’s viral loops and the success that RockYou was experiencing. Later I posted Comscore’s widget stats and it occurred to me that the companies distributing through the major social networks were absolutely dwarfing the others, by an order of magnitude.

These two posts coincided with a presentation I gave at Emanuele Quintarelli’s conference in Milan where I attempted to abstract the whole mashup/web/enterprise 2.0 phenomena into terms other than technology, and the most important trend that I pinpointed was distribution reach as the great equalizer.

While Facebook is getting a high degree of attention since launching their developer platform, there are other networks that offer increasingly similar distribution capabilities, including Bebo, Myspace, Friendster and Tagged. To some degree, eBay is also a distribution mechanism, as is Netvibes, iGoogle, Webwag, Protopage and Pageflakes. However let me be really clear about something, Myspace and Facebook are the only two that seem to have cracked the code on viral looping and that is really key to this discussion.

Marc Andreessen posted a detailed analysis of the Facebook platform, which I very much recomend you read, that nicely summed up why Facebook’s viral capabilities are so effective:

And then, on top of that, Facebook is providing a highly viral distribution engine for applications that plug into its platform. As a user, you get notified when your friends start using an application; you can then start using that same application with one click. At which point, all of your friends become aware that you have started using that application, and the cycle continues. The result is that a successful application on Facebook can grow to a million users or more within a couple of weeks of creation.

So rather than simply repeat what has already been written about Facebook, let’s talk about how traditional enterprise vendors should be playing this trend, and then look at one big question mark that is the elephant in the room insofar as enterprise social networks are concened.

Without question the large vendors look at Myspace and Facebook as mere toys and that reflects as much a misunderstanding of what these things are as it does the cultural disconnect that many enterprise software executives have with the broader market. They will say things like "our customers don’t use those services" without considering that while the CIO isn’t using them it’s an odds on favorite that a good number of people in the organization are.

It’s also worth pointing out that enterprise vendors consistently put themselves at the center of the universe like an aging movie star that doesn’t realize s/he is told old to play the role (think Sharon Stone in Basic Instinct 2). SAP/Oracle/Microsoft/IBM may be the gorillas in the global enterprise market but selling to 50,000 global customers out of a market of 100 million businesses (that’s a guess, I don’t know what the actual stat is) is hardly going to drive the growth each is predicting. This dovetails with something else I talk about frequently, selling to users instead of organizations.

The initiatives that each of the MISO vendors have spawned around widgets is a good start, but it’s not enough. Prosumer users really require the ability to create rich applications outside of the usual development platform, and to that degree SAP and Oracle in particular should be expanding their API support to include Facebook and Myspace integration.

Lastly, I mentioned the question mark concerning this topic and that’s Linkedin. While I can certainly appreciate that their focus on generating revenue and profit has been singular, what cannot be called anything other than a strategic blunder is their refusal to support broad-based third party application development, and to include a distribution platform on top of their social network.

I can’t imagine a vendor better positioned for enterprise domination in this regard than Linkedin, while at the same time I can’t imagine a vendor more likely to implode due to the lack of this capability. While not being privy to the goings on at Linkedin, I will say that this seems to be a tragic missed opportunity on their part.

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