November 7, 2011

The Consumerization of Business Software

One of the themes that we've been most interested in at
NextView over the last 12+ months has been the impact of consumer web
trends on business software.  

I'm not the first person to describe this trend, and my prior
background has been primarily as a consumer web guy more than in B2B
companies.  But I've seen an acceleration of the impact consumer web
trends are having on business software, and believe strongly that it
will provide a thread of innovation for SaaS companies for the next 5+
years.  The classic delineations of web products for business and
consumer ("enterprise" direct selling, on premise vs cloud, etc) are
only getting blurrier.

There's a couple different forces I see at work:

1) Selling & Customer Acquisition - In the last 5
years, the biggest force in business software was the impact of the
cloud as an infrastructure layer and product/service delivery mechanism.
 But in the next 5 years the web and mobile app stores will
increasingly be a force in selling and customer acquisition for busines
software.  People have been selling software over the web for awhile and
indirect selling via screensharing and webinar, etc isn't new.  But as
social media continues to pervade businesses large and small, and
purchase decisions increasingly happen at the user level (see #2) we
will see dramatically more customer acquisition happen via the web.  The
lessons learned from consumer Web 2.0 companies on user acquisition are
increasingly being applied to SaaS companies.    

2) Users Drive Enterprise Tech Adoption -
Historically centralized IT departments drove adoption of technology
within businesses large and small, but today user-level adoption is the
norm.  Whether tablets and smartphones via the BYOD movement
or SaaS tools like Yammer, Salesforce, and others (most of which
started bottom up at the user or workgroup level, not enterprise-wide
from top down), regular users are driving new software purchases.  This
is one component of why companies like RIMM are having a tough time of

3) UI/UX Matters in B2B - For decades, B2B
application developers could skimp on innovating in the presentation
layer.  This was in part because purchase decisions were driven by other
factors, but also because until comparatively recently most end users
didn't use software and digital media that much in their personal lives.
 Now that end users spend as much of their personal time with software
(in the form of social networks, tablet/smartphone apps, streaming
media, etc) as they do with business software they've become much more
discriminating buyers. B2B software can no longer just get away with
crappy UI... it has to at least match the ease of use and aesthetics of
all the consumer web products users love.  

We've invested in a bunch of B2B software companies at NextView and
I'm thrilled to see them steal pages out of the playbooks of successful
consumer web companies.  GrabCAD has used search optimization to drive the bulk of it's user acquisition, very similar to the way Yelp and others did.  InsightSquared
is tackling business intelligence software (hardly a sexy market) with
an incredibly sexy product that incorporates Facebook style timelines
and other features.  RentJuice is doing much the same in real estate software.  And as B2B selling is increasingly done over the web, SalesCrunch
is becoming one of the arms dealers to sales forces everywhere.  I hate
indulging in wanton portfolio self-promotion, but my partners & I
are incredibly excited about these companies and will undoubtedly
continue to make more investments in this vein.  

At present the consumer web is the tail wagging the enterprise dog,
in that you see business software companies copying consumer companies'
marketing strategies, product features, etc.  I think this will continue
for a few years at least.  But hopefully B2B software companies will
innovate in some interesting ways that will bleed into consumer-facing

Lee Hower is a Partner & Co-Founder with NextView Ventures.  You can find this blog post, as well as additional content on his blog called AgileVC.  You can also follow Lee (@leehower) on Twitter by clicking here.