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1/27/2006
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What Changed in 2005?

Last year was an interesting year in the collaboration space. There were some major mergers and acquisitions (Adobe and Macromedia; Webex and Intranets.com, etc.), which were product of a maturing collaboration market and the result of a number of driving forces -- not the least of which is a realization by many organizations that collaborative functions themselves are only part of the solution. 

We see a number of vendors beginning to realize this. They are leaving the general collaboration market to the Microsofts and IBMs of the world, and narrowing their focus on either vertical markets or specific processes. One such vendor, which I have written about recently, is Open Text.  Open Text has done an excellent job of partnering with other companies to provide successful offerings in a number of vertical markets like oil and gas, government, and financial services.  Recently, Open Text took a turn away from collaboration, letting Microsoft deal with those functions, and on top of this Microsoft/SAP platform they are building applications to deal with Sarbanes Oxley and other regulatory compliance issues. Open Text has always been a bit ahead of the pack in this sense, so we expect even more collaboration vendors to throw in the towel and move out of the horizonal collaboration market to focus on specific verticals.

A second trend we see is the loosening of investment monies for software start-ups, including many in the social software and collaboration space. Venture capitalists, always wanting to reduce risk in their investments, now demand that the application be developed and deployed before they invest, reducing the one of the largest risks (that of the software never finishing development). Fortunately, this converges with a number of other trends such as “Software as as Service” (SAS), and the emergence of agile development and extreme programming environments. In addition, there are now many freeware or Open Source tools to help with this type of development as well as both Java and dot net frameworks. 

All of these, along with the trend in outsourcing, have combined to make it possible to create applications in a very short time and for very little money. In the past, it may have cost $500K for seed investment, but today applications can be built for $25-$50K. What this means is that these applications can not only be built more quickly and easily, but that start-ups can now start with a much greater valuation if they do work with VCs. Recently we have seen applications like: Writley, Basecamp, Sugar CRM, GroveSite and others that are great examples of these trends.

Another trend we are seeing, and one that will increase in 2006, is a proliforation of collaborative offerings, so much so that it will become even more confusing to end users. On the upside, with many of these solutions offered as an SAS, end users can often try these solutions for free for a short time, and this can help to eliminate some of the confusion.

So what should we expect in this year? More of the same.  We will continue to see consolidation in the collaboration space, especially in the horizontal tools area, and by the end of the year we should be down to about a dozen vendors occupying this space (including IBM and Microsoft, etc.) with more and more vendors moving into vertical and process solution areas.  We also expect to see the last collaboration vendors offer A/V/D conferencing. Along with consolidation, we will also see expansion, mostly occuring at the edge of the net, in the area of podcasts, blogs, wikis and having those technologies move more and more into the mainstream. Blogs and wikis are already taking on a corporate flavor in 2005 and we will see more of that this year.  There will also be some major mergers and acquisitions in 2006, and we will also see more of the zombie collaboration vendors finally die off, or run out of money. Needless to say, 2006 will be as active a year in the collaboration space as 2005 was!

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