A new era for enterprise IT

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Amidst the newly minted scooter unicorns, ebbs and flows of bitcoin investments and wagers on the price of Uber’s IPO, another trend has shaken up the tech industry: the explosion of enterprise software successes.

Bessemer notes that today there are 55 private companies valued at $1 billion or more compared to zero a decade ago. Proving this isn’t just private market hype, enterprise cloud companies have well-exceeded $500 billion in market cap and are on a path to hit $1 trillion in the next few years. Whether it’s the masterfully executed IPOs of Zoom and PagerDuty, and the imminent Slack IPO, or the mega funding rounds of companies like Asana, and Airtable, Front, and many others, the insatiable demand for enterprise cloud deals shows that the new era of IT is no longer a zero sum game.

Back when we started Box in 2005, we saw a disruption on the horizon that would change enterprise software as we knew it.Led by the same trends that were impacting the consumer internet — growth of mobile, faster web-browsers, more users connected online — combined with the advent of the cloud, enterprises in every industry are forced to transform in the digital age. But we could barely have imagined the scale of change to come.

A tipping point for best-of-breed IT

Today’s enterprise software market doesn’t look like the enterprise software of the past. For one, the market is much larger. Deploying software in the on-prem world required a team of highly trained professionals and a hefty budget. By lowering costs and and removing adoption hurdles, the cloud expanded the market from millions to billions of people globally and in turn, businesses are using more apps than ever before. In fact, Okta found in their latest Business @ Work Report that large enterprises are deploying 129 apps on average. It’s therefore no surprise that software spend is expected to reach more than $420 billion in 2019 as the shift to the cloud marches on.

With a market of that magnitude, enterprise IT no longer can be controlled by just a handful of vendors, as we saw in the 90’s. And what were once solved problems in a prior era of IT are now unsolved relative to rapidly changing user and buyer expectations in the cloud, leaving the door open for new disruptors to emerge and solve this problem better, faster, and with more focused visions.

Previously pesky problems like alerting ops teams to technical issues have turned into an entire platform for real-time operations, leading to PagerDuty’s $3 billion valuation in the process.

Everyone thought video conferencing was a tired market but Zoom proved that with extreme focus and simple user-experience its team could build a company worth over $15 billion. Atlassian has generated $25 billion in value by building a portfolio of modern development and IT tools that power a digital enterprise.

Slack has shown that real-time communication and workflow automation can be reinvented yet again. And making this approach work seamlessly are services like Okta, which is valued at $10 billion today.

In all of these cases, “best-of-breed” platforms are growing rapidly in their respective markets, with near limitless size and potential. And as processes for every team, department, business, and industry can now be digitized, and we’ll continue to see this play out in every category of technology.

If the move from mainframe and mini-computers to PC saw a 10X increase in applications and software, the move from PC to cloud and mobile will see an order of magnitude more.

From IT stacks to cloud ecosystems

We’ve reached a new era of enterprise software and companies are coming around to this model in droves.
What seemed unfathomable merely a decade ago is now becoming commonplace as Fortune 500 companies are mixing and matching best-in-class technologies — from upstarts to cloud mainstays like Salesforce, Workday, and ServiceNow — to power their business. But there’s still work to do.

To ensure customers get all the benefits of a best-of-breed cloud ecosystem, these tools must work together without requiring the customer to stitch systems together manually. Without interoperability and integration, enterprises will be left with siloed data, fragmented workflows and security gaps in the cloud. In a legacy world, the idea of deep integration between software stacks was great on paper, but near impossible in practice. As Larry Ellison described in Softwar, customers were left footing the bill for putting together independent technology themselves. But the rules have changed with today’s generation of API-native companies with open cultures and a deep focus on putting the customer first.

Notably, even the largest players — IBM, Microsoft, Google, Cisco, and others — have recognized this tectonic shift, a harbinger of what’s to come in the industry. Satya Nadella, in taking over Microsoft, recognized the power of partnerships in a world where IT spend would be growing exponentially, telling Wired:

…instead of viewing things as zero sum, let’s view things as, ‘Hey, what is it that we’re trying to get done? What is it that they’re trying to get done? Places where we can co-operate, let’s co-operate.’ And where we’re competing, we compete.

As Peter Sole, former head of the Research Board, points out, in this digital world we can no longer think about a few vendors owning layers in a stack but instead as an ecosystem of multiple services working together to deliver value to the entire network. The incumbents that successfully thrive in the digital age will be those that despite their scale, work and operate like the nimbler, customer-obsessed, more open disruptors.  And those that don’t will face a reckoning from customers that now have choice to go a different direction for the first time.

Gone are the days of monolithic IT stacks and zero sum thinking; this is the new normal. Welcome to a new era of enterprise IT.

Written by Jonathan Shieber
This news first appeared on https://techcrunch.com/2019/04/26/a-new-era-for-enterprise-it/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29 under the title “A new era for enterprise IT”. Bolchha Nepal is not responsible or affiliated towards the opinion expressed in this news article.