by CIO Staff

Is Enterprise Technology at a Standstill?

Feb 16, 20063 mins
IT Leadership

Light post this week, as I am in the middle of moving offices. I can’t think of anything I’d rather be doing, outside of maybe getting a root canal. OK, enough with the sarcasm. For any of you who have an interest in the future of the software industry, check this out. I think Bill Burnham, a fellow VC, summarizes all of the things that make the enterprise software business a challenging one today. His view is a common one on Sand Hill Road today, where many investors are much less interested, if not fleeing the enterprise technology category.

Much of this concern is based on a few presumptions about buyers of enterprise technology. First, there is a widely held notion that buyers today are in no hurry to invest in new capital projects, in part because there is no fundamental platform shift that is spurring them to do so. Whether it was the shift from mainframes to client/server to Web based architectures, Y2K, or some other fundamental shift in technology platform, there simply isn’t anything here that justifies spending lots of capital to do a technology refresh of a company’s infrastructure. Second, because of the advent of open source, outsourcing and the commodotization of computing (i.e., Linux and Intel), the prevailing attitude of enterprise technology buyers is to focus on saving money (a less risky proposition) as opposed to spending on new projects. The underlying notion held by many business and IT executives, particularly those who invested heavily in the first generation of Web based projects, is that while big projects may pose great rewards, they are, for the most part, still too risky to pursue. Take these trends, throw in some big questions about whether IT matters, and voila: VCs begin to turn on a sector.

I believe that many VCs here in Silicon Valley often tend to swing from one end of the spectrum to another when it comes to our “feel” about a particular space and whether we should be investing. For example, in 1999, we collectively went gaga over the Internet, and conversely in 2002, anything resembling a dotcom was simply anathema. Nevertheless, the underlying trends of Internet adoption by consumers grew unabated. Now, that is not to say that VCs are completely leaving the field of enterprise technology investing. On the contrary, it is one of the biggest areas of venture investment to date. However, it’s hard not to get the sense that many VCs are beginning to look elsewhere, whether that be overseas, in China or India, or to consumer facing Internet companies (again) for their returns.

I for one am still a believer in startups selling into the enterprise, and that disruptive forces like open source and software as a service create phenomenal opportunity. Which leads me to my question for you, the readers of CIO magazine: What’s your view? What big ideas or projects, if any (that involve the procurement of technology), are you investing heavily in and why? What problems have gone unsolved for you? In my view, we as a community don’t pose these kinds of questions to the end users of technology often enough, in part because there isn’t a great forum in which to engage in a broad conversation. Hopefully we can get some of the discussion going here.

Thanks, I look forward to hearing from you soon.