Enterprise 2.0 - some great posts on the beauty of edge-in adoption

Nic Brisbourne at Esprit has put together a really concise post about the market entry strategy of Enterprise 2.0 companies. I totally agree with his premise and have thought it's one of the most exciting opportunities in the current arena. Maybe I've just missed it, but I'd really like to see a great example of this having worked. Please point me to any great examples, excepting perhaps Salesforce.com, which seems to be used as an exemplar for every enterprise software strategy in the last five years!

Littlewoods Subsidiary adopts Blue Prism Technology

Everyday Financial Solutions, a subsidiary of Littlewoods Shop Direct Group is to deliver business efficiency improvements with Blue Prism Automate.

It's great to see another endorsement for Blue Prism's technology- well done Alastair, David and the team!

The kind of feedback tech startups need

Blue Prism just got a great write up about their work with the Co-operative Bank, where their software is increasingly being used to automate processes.
It's great when a large company is willing to help spread the word for a relatively young company like Blue Prism, it's a simple and comparatively painless way in which a large company can support a supplier.
What I find slightly disappointing is that it seems to me that very often the large purchaser will not offer their vendor this kind of support. For example, Blue Prism has some other similar companies who appear more reluctant to go on the record about their work with the company.

Economics of Software-as-a-Service

Talking to a former exec from an IM supplier to SMEs I gleaned some useful insight today. His company had sold a fairly standard type of secure IM to SMEs. To start off with they'd sold the software, installed on the customer's servers, on a rental model, mimicking the "Software-as-a-Service" approach which is now so popular with startups. However, he explained that the company had gained much more sales traction with customer when, after some time, they reverted to a classic upfront software licence and downstream support payment model. Whilst I could understand one or two customers feeling this way I was initially surprised that it was such a transformational change. I was surprised that customers weren't fairly uniformly delighted with being able to link the timing of the cost to the timing of their benefit.
Without knowing the details I can only speculate, but it did strike me that the USP for this provider's product was really about helping them feel secure in an application, IM, where their particular customers were less comfortable (otherwise I'd argue that there are loads of similar alternatives). So to some degree they were selling to maybe the "late majority" rather than "early adopters". Maybe these people in particular could be said to be rather slower to adapt to new models for buying software, but also perhaps to be characterised by a different cost of capital.

Cost of Capital

In economic terms most SME's, but especially early-stage technology companies, have a VERY highcost of capital (I've seen it figured out to be around 80%), whereas the customer's cost of capital- particularly if it is itself stable/mature (i.e. late majority), maybe more like 12-20%. It therefore makes little sense from a purely economic standpoint for an early stage company to use a "rental" type payment model for software provided to a customer who's an established business. Perhaps more simply put, an early-stage company may have to pay precious early-stage venture equity rates for money to fund the working capital element of providing a "rental model".

Summary of differences

I've attempted to put together what I could think were the key selection differences between a "rental" model and an "upfront" model.

"up-front" model	"rental" model
Favourable where vendor has higher cost-of-capital	Favourable where the vendor has lower cost-of-capital
Suits better laggard customers	Suits better early-adopter customers
High investment can make for reluctance to change out	Contractual commitments can keep customers "locked-in"
"Capital" budget can be harder for vendor to access	Contractual details on termination, rate increases etc can be harder to negotiate through purchasing
Upfront revenue particularly helpful where costs of acquiring customers are high	Rental revenues helpful where costs of supporting customers are high

(Please use the comments section below- I'm sure this is far from exhaustive- and I'll add your contributions into this table as best I can.)
You may be surprised to realise how strong the Cost-of-capital effect is in practice. Take the following example:

• Company A sells their system on a rental model for £10,000
• Company B sells the same thing on an upfront plus support basis for £15,000 upfront and £2,500 annual support charge.

The Net Present Value of both of these revenue streams for a early-start company with a 50% cost of capital is actually about the same (my workings are here), whereas I suspect that most of their customers would very much prefer to pay that little bit more for a perpetual licence!
As always your comments are very welcome.

Web 2.0 + Enterprise = Enterprise 2.0 ?

Alastair Bathgate raises the excellent question of whether Enterprise 2.0 is missing something?. I think that in general there is a bit of a tendency to suggest that taking a web2.0 businesses like Facebook ,and then suggesting it to enterprise customers, doesn't really make it "enterprise grade". There's a whole set of essential enterprise needs such as searchable archives, recognition of organisational structure, management access and access control as a minimum. But Alastair also points out that more abstract ideas like processes, audit and compliance really matter in this context too.

39% of IT Managers think Excel is Rogue IT

BluePrism, one of our investees has just conducted a survey into "Rogue IT". It was a surprise to me on first inspection that "complex Excel spreadsheets were Rogue"! On reflection, I guess that's understandable, you can build a great deal of mission-critical stuff in Excel, even without doing Macros/VB (I know we do!).