Open source disrupting the Web 2.0 market size
On Thursday, Jeff, Bryan, Barry and I had a follow up meeting with Oliver Young, who recently released Forrester's Global Enterprise Web 2.0 market forecast. Oliver's been pretty busy explaining that his forecast methodology focused on just seven specific tools used in Web 2.0 deployments, and not the entire Web 2.0 market. It was an important clarification that addressed my questions about the costs related to generating user content or gardening collective intelligence. In particular, he noted that Web 2.0 tools like Social Networking, RSS, Mash-ups, Wikis, Blogs, Widgets would continue to grow aggressively, but that they are really just a fraction of a percent of the trillion plus dollars in information technology spending worldwide.
Oliver expressed skepticism about many of the Web 2.0 vendors in the market today. IBM and Microsoft are moving aggressively to catch-up on the high cost end. On the low cost end, open source communities like the Drupal community are innovating and adding features at a furious pace. That makes it extremely difficult for a team of 20 engineers to keep up with adding features to develop a competitive Web 2.0 suite. Even if a Web 2.0 vendor has an open source license, it is not clear how they will compete if they don't have a rapidly growing community innovating. What does this mean? The Drupal community is a part of the creative destruction of a market that won't grow as fast as a market dominated by proprietary vendors. Don't worry, Drupal folks are still plenty in demand.
I've been told to view analysts predictions with a great deal of skepticism. Let me draw on some of my personal experiences that concur with Oliver's observations. In the last seven days, I've met with representatives from three of the biggest media companies in the US. I didn't schedule these meetings, I was just at the booth at MySQL expo or just socializing at the Web 2.0 expo. When they saw that I was working with Drupal they were immediately engaged in telling me how they loved Drupal and were deploying it in multiple projects. In some cases, they had been experimenting with it and were now deploying more widely. In other cases, it's part of a new initiative to raise revenue and hit key marketing goals. What's critical in this feedback is not that they are using Drupal because it's cheaper; these companies have lots of money. The biggest media companies are using Drupal because they can have the features they want faster and they can grow their deployments rapidly to meet growth initiatives coming from their marketing teams. In other cases, they are using it because their Software as a Service solutions aren't moving fast enough to meet their marketing departments needs. There's no talk of budget cutting, or cost savings to justify using Drupal. Drupal is winning on its value and speed of execution in a tough competitive marketplace.
Oliver made some predictions as to where he thought the next hot market would be. He thought that the introduction of cloud computing services like Amazon Web Services, Google's App Engine, Sun's Project Caroline, and possible entrants from IBM and Microsoft would make the cost of computing drop even further. Competition would drive higher quality cloud based services. This is likely to spawn a variety of exciting software services. Let's hope these companies ensure that these cloud computing services are accessible. IBM and Sun are still trying to recover from their mis-steps with Java, the programming language for the internet, by making it too expensive to run in cheap hosting or too expensive to bootstrap a start-up. Accessibility, meaning zero costs to start and without vendor lockin, is key to ensuring cloud computing vendors achieve growth and the economies of scale they need to make it profitable.