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Summary:

Enterprises spend $270B on software every year, yet some don’t yet some can’t even calculate the number of employees in their organizations. Rudimentary challenges like this plague every enterprise in the world. When deriving anything beyond enterprise software basics, most corporations are out of luck.

Briefcase

Enterprises spend $270 billion on software every year, yet some can’t even calculate the number of employees in their organizations. Shocking? Well, such was the problem for Chiquita before they moved to Workday.  But rudimentary challenges like this plague every enterprise in the world, and every individual within those enterprises. When we need to derive anything beyond the basics from our enterprise software, most corporations are out of luck.

This problem is only getting worse. With 1.8 trillion gigabytes of information projected to be generated and stored this year alone, our enterprise technology is on a collision course to become utterly useless if something doesn’t fundamentally change.  The data being created is obnoxiously large, with IDC citing that “by 2020, IT departments worldwide will need to administer 10 times the number of servers–both virtual and physical–50 times the amount of data, and 75 times more files.”  Our software, infrastructure, and organizations are ill-prepared to manage this scale of data creation, let alone generate anything meaningful or useful with this amount of content being created and shared.

But this is about to change. It has to. The cloud, social capabilities, and a web of integrated applications are on the verge of creating a far more personalized technology experience for tomorrow’s workers, and a world where an increase in data generates an increase in value and knowledge for organizations.

The client-server paradigm and a reverse network effect

The emergence of the personal computer may have transformed the way we work, but the software revolution that followed was anything but personalized. And amazingly, very little has changed for today’s average knowledge worker over the past two decades. The legacy software within today’s enterprises is stale, static and non-contextual. Applications don’t adapt to our behavior, or tell us anything new about our content and projects that we didn’t explicitly tell them. And they certainly have no understanding of our relationships with co-workers, partners, or customers.

It’s not just end users who are suffering. Technology still rooted in the client-server paradigm invariably prevents organizations from deriving real value from their systems.  Generally, any influx of employees or the addition of a geographically disparate team requires new instances of applications and infrastructure. An organization might have SharePoint running in many different data centers throughout the world, making it nearly impossible to efficiently upgrade applications, deploy new servers and perform maintenance at scale. And with application sprawl comes data sprawl, creating a veritable digital landfill of unconsolidated, silo-ed information.  In looking at the fragmentation of SharePoint in large organizations, a leading enterprise content management analyst, Alan Pelz-Sharpe, discovered that “…enterprises can in fact reach a point of negative returns where an inability to manage proliferating SharePoint silos becomes a hidden but serious enterprise management risk.”

Enterprises everywhere are experiencing the opposite of a standard network effect with their information and people. In these sprawled and firewalled environments, an increase in users and data make it more difficult to locate content, make decisions, and gain insights from past actions.  This means more information is creating more complexity – far from the ideal outcome if organizations are about to generate orders of magnitude more information.

The cloud and centralization

Of course, decentralization and fragmentation of data and applications isn’t a new problem by any means. Early last decade, Oracle decided that application and data sprawl were hindering customers’ agility, decision making and cost savings.  Larry Ellison said of the client/server era, “Your information was chopped into tiny pieces, stored in lots of tiny databases, running on lots of tiny PC server computers.  This data fragmentation was accompanied by distributed complexity.”

Not surprisingly, Oracle’s solution to this problem was to have all core applications run on a single Oracle database instance with consistency across its apps. This would have worked marvelously if the world wanted to adopt only Oracle’s software — but that comes at the cost of tying your entire fate to a single vendor’s vision, roadmap and services.  With the emergence and maturity of cloud platforms, there’s now another way.

On-premise applications are inherently limited in that they rarely leverage data beyond what’s immediately available on a local machine, server or narrow data store. The opposite is true with most cloud products that take a centralized approach to storage and computing, and we’re only now starting to tap into their potential.

At Box, our model is store once, extend everywhere — and “everywhere” spans desktops, smartphones, tablets and even other apps. With the cloud, users can get to content and tools from any device, and IT departments are no longer burdened with maintaining and upgrading cumbersome hardware and software. This is making today’s employees more mobile, nimble and productive, and it’s enabling organizations to focus on competitive differentiators rather than systems management and maintenance.

But centralization is only phase one. If the first wave of the cloud is about realizing the efficiencies of moving software to the web, then the second wave is about making this software — and in turn, our organizations — much smarter. Software has tremendous potential to look at lots of pieces of information and make decisions to produce optimal outcomes. Then learn from these results, iterate, and do it again. We’re seeing this at work in the consumer world: think about how Facebook exposes the people we’re likely to know or updates we’re likely to engage with, or how Netflix makes personal recommendations to its users, aggregating and learning from the ratings across millions of users. As described by Mike Olson, the CEO of Cloudera, the power all this data is about being able to answer qualitative questions like, “What do you like? Who do you know?” and no longer about simply solving basic equations.

Applied in the enterprise, our software, backed by large amounts of information to cull through, can tell us far more about our businesses than we could ever know ourselves.

From the social enterprise to the smarter enterprise

Given our trajectory, all enterprises will soon be filled with dozens or hundreds of light and heavy-weight applications that are function, company and industry specific. Salesforce.com has an app marketplace of thousands of add-ons, Jive and Yammer have their own respective ecosystems. With apps that can talk to each other, we’re seeing the emergence of a much more integrated enterprise technology stack – starkly contrasting the vertically integrated solutions from a single provider, apps are pulling from different data sources to create powerful mashups and overlays. Roambi, for instance, makes it easy for you view your CRM data from your iPad. Marketo lets you create extensive marketing automation customizations tying together email marketing, Google AdWords, and Salesforce.

But rather than the proliferation of apps creating more fragmentation, they’ll actually increase personalization and relevance of information. Driving this will be the social utilities that wrap around our enterprise applications of the future. Every action we take in our personal lives can be manifested as a social event, whether it’s checking into a restaurant, accepting a party invitation, or updating a status — our whereabouts, thoughts and actions help us engage with others both actively and passively. The same is becoming true in the enterprise, and it will create the first real ROI we’ll see from social activity in the enterprise. Yammer, Jive, Box, and Chatter securely broadcast the work we’re doing to our coworkers, and we’re about to see yet is what happens when these streams become more connected to all the other applications we’re using.

But it’s not just about creating a more social workforce with frequent status updates, file “likes” and ad-hoc conversations. In the enterprise, social is only useful if it makes us smarter. Think about it. You update a project status and all the relevant participants are passively notified of the change or delay.  Or a member of the sales team uploads content for a proposal, and someone from another department or team comments on its relevance to their own work.

As our social stream algorithms improve, user behavior will drive for better ranking of the information you and others should be looking at.  And with federation and syndication of this data and events, our applications will all work smarter together.  An HR update in Workday will prompt a response from someone on Chatter.  Customer support requests on Zendesk are analyzed by an executive in GoodData.  Software will be able to quickly connect the dots across people and data, building a combined view of the most important information. Most importantly, this can all be done passively, with little to no involvement from the user.

Rather than an increase in information and engagement yielding diminishing returns, our systems will get smarter with every interaction. We’ll be served content that has been filtered by our colleagues, and outputs that are corroborated by multiple platforms. As individuals and organizations, we’ll move faster and make better decisions based on better data. This is what we’re starting to hear from customers when they deploy cloud solutions like Box and others. This is the future.

Aaron Levie is CEO and founder of Box.

Image courtesy of Flickr user Susan NYC.

  1. Nice post Aaron.

    IMO the key objective is an on-demand intelligent Cloud Solution with semantic integration ( coherent and consistent information with meaningful connections and relationships ) across whole IT stack from hardware to application layers to data and content ( Web & Enterprise )

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  2. Not just cloud, but SaaS to boot with it. The network effects are coming to the enterprise. If 600 million Facebook users can be connected, engaging with each other and sharing inner details, why can’t 5,000 or 300,000 employees within a company?

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  3. Tell that story!

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  4. Aaron, you nailed it. I could not be more convinced if a bulldozer dumped a load of fat IT hardware and software all over my front lawn. The opportunity for businesses and government to become more agile and productive is significant. However, there will be many voices and dollars in opposition to the coming wave of innovation. Those organizations that embrace the flexibility of products like Box and understand the workforce changes that are inevitable will be poised to grow and prosper. Those that don’t will just keep proliferating bloated and overly complicated products that are only architected for complexity and vendor lock-in. The IT professionals that refuse to embrace the change are also plotting a course to irrelevance because they refuse to change. The 7 deadliest words in business and life “We have always done it this way”

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  5. Interesting read. Just read ‘Going Bedouin’ by Greg Olsen and found it interesting. I think the right blend of cloud computing and traditional approaches is key. For me cloud = 60% Traditional = 40%.

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  6. Alexander Oshunloye Monday, September 26, 2011

    Interesting read. Just read ‘Going Bedouin’ by Greg Olsen and found it interesting. I think the right blend of cloud computing and traditional approaches is key. For me cloud = 60% Traditional = 40%.

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  7. Aaron Rothschild Monday, September 26, 2011

    Excellent Post, in my experience – the biggest challenge with this directional change is going to be making integrations making meaningful, deep integrations – that doesn’t form more silos.

    As you mentioned with Salesforce’s appexchange – we are seeing decently integrated applications that focus on their core use cases and functionality. However, this is creating it’s own set of silos in organizations. I have seen many cases of enterprises adding multiple instances of the same SaaS applications in different departments. This is the manifestation of SaaS apps being able to be adopted and purchased by business owners rather than always going through their IT department.

    In my opinion, the biggest advance Salesforce.com has brought to enterprises, large and small, is the ability to act as the backbone for customer data and providing a rich API to third party applications to access to a cloud based, common backend where information from different apps can be correlated and analyzed. Salesforce is no longer a CRM system – it acts as middleware for the various applications that need to communicate with each other and access a common set of data used in the enterprise.

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  8. @Aaron Rothschild – Aaron I agree with this. Same is also true in the small business space with Intuit and the Intuit Partner Platform. These approaches are a great step forward but still are constrained by the underlying data model. Having said that, I would rather be constrained by a customer-centric data model such as Salesforce (and there are the technical tools there for those that know what they are doing to entend it), than an accounts-centric data model á la Intuit.

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  9. Aaron Rothschild Monday, September 26, 2011

    @Hugh – excellent point, which often doesn’t get much attention. Coming from a Marketing automation background, often the hardest thing for B2B companies to come to grips with is:
    1) You market software to PEOPLE in a company but
    2) COMPANIES (accounts) are the ones who actually buy/pay for your product

    This is getting cloudier (no pun intended) as we see PEOPLE buying software for companies and the companies themselves aren’t even aware of it. See: http://cloudability.com/blog/68-of-the-fortune-100-are-clueless

    An interesting quote from meeting with a Fortune 100 CRO – “Software Vendors and Drug Dealers are generally the only people who get away with calling their customers ‘users’ “

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  10. Aaron – Well said. The systems that drove the automation era, and were hugely successful, are now stifling the collaboration era.

    You might enjoy my post on Gary Hamel’s MIX – http://www.managementexchange.com/hack/re-humanize-enterprise.

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