Enterprises plug-in to web 2.0

Enterprise spending on web 2.0 technologies will surge over the next five years, growing 43 per cent per year to reach $4.6bn globally by 2013, according to a new report by Forrester Research.

The analyst firm believes that web 2.0 technologies represent a " fundamentally new way" to connect with customers and prospects and harness the collaborative power of employees.

Large enterprises such as General Motors, McDonald's, Northwestern Mutual Life Insurance and Wells Fargo have all made heavy use of these tools, the report found.

Some 56 per cent of North American and European enterprises consider web 2.0 to be a priority in 2008, according to the Forrester survey.

"Software firms can make money selling enterprise web 2.0 software, but it will not be an easy road to hundred-million-dollar run rates," said Forrester Research analyst G. Oliver Young.

"The market for enterprise web 2.0 tools will be defined by commoditisation, eroding prices and incorporation into enterprise collaboration software over the next five years.

"It will eventually disappear into the fabric of the enterprise, despite the major effects the technology will have on how businesses market their products and optimise their workforces."

The key question for software firms is who will pay for web 2.0 in the enterprise. Forrester identified three challenges that vendors will face:

• IT shops are wary of what they perceive as insecure consumer-grade technology
• Ad-supported web 2.0 tools on the consumer side have set 'free' as a starting point
• Web 2.0 technologies enter a crowded space dominated by legacy software investments

Large businesses currently spend more on employee collaboration tools than customer-facing web 2.0 technologies, but Forrester expects this trend to reverse by next year.

By 2013, investment in customer-facing web 2.0 technology will dwarf spending on internal collaboration software by nearly a billion dollars.

"Social computing and web 2.0 marketing are still in their infancy, and in general the market is still in an experimentation phase," said Young.

"In the long run, the affect of web 2.0 will be enormous. But what may prove to be of more value to vendors will be the skills of running a successful software-as-a-service business.

"For the vendors that do it well, disaggregating expertise about the medium from web 2.0 content is likely to provide far more value than wikis and blogs ever did."