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Consumerization of the Enterprise – Phase 2




Consumer VCs like to make light of the Founders Fund mantra ‘We wanted flying cars, instead we got 140 characters.’ For those of us working in the enterprise, it’s actually the reverse, “They promised us 140 characters, instead we got Workday.”

Since 2010, SaaS applications were supposed to “consumerize”, but as anyone who has used the majority of SaaS applications released prior to 2014 knows, they are still clunky, punishing interfaces that happen to be hosted in someone else’s datacenter. 2014 is proving to be the year where this changes, with a large wave of new-generation SaaS apps that really deliver on a delightful user experience. Employees and managers are taking notice of these new user-friendly tools, causing adoption to explode from the bottoms up.

Consumerization of IT – the second wave

Up until about 10 years ago, large enterprises were the primary consumers of technology, and they drove the agenda for where dollars were invested and innovation happened. But between 2000 and 2008, consumers overtook enterprises and became the largest buyers of technology. Ever since then, consumers have driven the most important innovations. And enterprise technology has struggled to keep up, in what is known as the consumerization of IT.

In the first wave of consumerization, employees brought their smartphones and tablets to work, and expected their IT groups to support these to access corporate systems. But ever since apps like Uber became ubiquitous, a second wave of consumerization has started to happen: Consumers now expect an Uber-like experience in their work lives. And yesterday’s enterprise systems fall woefully short of that bar.

Consumers used to say “I’ll deal with whatever system you give me,” then they said, “I’ll bring a better system, just support it,” now they’re saying “I expect a system that enables a better way of working, deliver it”. The baseline expectation has shifted, and this has been led by an increasing number of experiences in their personal lives becoming easier and better. Using Uber and Lyft as an example, it’s less about the gorgeous UI/UX of the apps, but more about how they rewrote the unpleasant experience of hailing and riding in a cab, making the consumer feel like a VIP in the process.

Customer-facing Systems – the first challenge

This problem is most acute when it comes to the interface between a business and its customers. In the past, most business used people as the primary interface to their customers. But consumers and corporate buyers hate the inconvenience of restricted business hours, long wait times, complex IVR menus, and staff that are often less than knowledgeable. They prefer self-service. And now they expect that self-service to be easily accessible on their smartphone, with the same kind of beautifully-thought-out user experience that they have seen is possible with leading consumer apps. If they don’t find the kind of digital experience that they are looking for, they will often look for a competitor that can offer it to them. And finding a competitor usually requires just a few clicks.

Digital Experience defines your brand

To summarize,  Digital Experience is now defining the brand of more and more companies. Customers expect to place orders, check status, get notifications of changes and updates, etc. via simple and elegant mobile apps. The quality of the experience in using a company’s mobile app now frequently defines how the buyer thinks about that company. This has become so important that Forrester Research went so far as to say that “In the 21st century, successful brands will rise and fall based on software.”

Not just Customers, but Employees too

But it doesn’t just stop there. Although customers are the most important priority, right behind them come a company’s employees. Increasingly tech-savvy employees are experiencing how mundane tasks can be re-written by apps like Uber and Shypp, and are looking to redefine the painful tasks in their work lives. Sadly most current IT systems are a far cry from this. Even the first generation of SaaS solutions are being viewed as legacy and unsatisfactory. Just ask sales people what they think of Most will tell you that they hate it, as it makes them do more work. This is because CRM was designed for the sales manager and not the sales person.

Surprisingly, even Workday is viewed as a legacy system in SaaS clothing. Users of Workday in our portfolio companies consistently tell us how much they hate the user experience. (One individual showed me the eight page word document that their HR department had to put together to guide them through the many complex steps of a performance review.) Workday was designed for the HR professional who was OK going through a long training and setup period, and not for the employee and manager who are looking for simple and convenient ways to get their job done.

What we notice with SaaS apps like Salesforce and Workday is a focus on being system of record that solves a particular business problem. Employees are often slaves to the system, doing tedious data entry. What’s missing is a focus on rewriting the way that work gets done. And the quality of the user experience in using the app. New SaaS companies are emerging to address this gap.

To get around the inefficiencies at work, employees and managers are purchasing next generation, consumer-grade, SaaS applications using just a credit card, without waiting for IT approval. Savvy SaaS vendors take advantage of this with either Freemium offerings, or low priced offerings that enter via an individual or small department. Then, once they have proven the success of the system, they call higher in the organization to expand the usage of the application, touting the success of the current users as proof of the effectiveness of their software.

For this strategy to work, the developers of this next generation of SaaS apps know that they have to immediately delight the user, and keep them engaged over time. There is a huge focus on the user experience. And careful steps are taken to measure and optimize user engagement. These apps are no longer the old style of thin client web application where the page is rendered on the server, and has to be reloaded with every change in the app. Instead the application development paradigm has changed, and developers now use frameworks like Meteor to build “thick client” apps written in Javascript to enable the kind of instant refresh that consumers have gotten used to in Facebook, Google Maps, etc. Part of the magic of Uber is that you see your car moving on the map, without having to constantly hit the refresh button.

Frequently, mobile apps are becoming the most important client, as users look for the convenience of any time, any place, access, and apps take advantage of the many converged features on a smartphone (geo-location, multi-modal communications, camera, address book, calendar, etc.)

Companies like Zendesk have led the way by re-writing how businesses interact with their customers. And the experience of using the app is a pleasure due to “beautifully simple” design. Their application is easy to set up, simple and intuitive, yet full of powerful functionality. By dropping a couple of lines of JavaScript onto your web site you enable an entire customer self-service help desk. That help desk enables a new and easier way for customers to interact with your business and get resolution to their problems.

Changing the way that work gets done

Looking below the surface of the design of the UI, we see a renewed focus on how work gets done. Much like Uber, SaaS application designers are going beyond skin deep UI changes, and focusing on rewriting mundane, inefficient, time-wasting tasks, and poor communications between different parties that need to work together. We’re seeing slick new applications like HubSpot’s Sales that do most of the research for a sales rep before they make a call, and then do all the data entry into the CRM system for the rep. Sidekick also checks to see if anyone else in the company is talking to that customer. Unlike CRM, this kind of tool is aimed directly at helping the sales person do their job better.

Sidekick Email Profiles
HubSpot’s Sales browser panel that pops out as an overlay when viewing contact information in another application

In the HR space, we are seeing apps like Namely that provide human capital management that is employee and manager-focused. Namely drives employee engagement and adoption through mobile self-service tools that make employee and manager’s lives far simpler. This has the interesting side effect of reducing work for the HR staff, as they no longer have to enter the data. The result of intense employee engagement is that Namely is able to help create the culture that attracts the best talent. And once they have joined, Namely helps drive alignment around corporate goals, and reinforces the cultural behavior that the CEO believes in.

Namely’s Company Feed (similar to Facebook)

Apps like Slack are improving team communications, making it easy for employees to stay informed on topics that they care about. Lever, recognizing the severe talent war that exists in the tech world, provides a hiring platform  so elegant and powerful that hiring managers, employees and candidates love to use it, and collaborate tightly on identifying, qualifying and selling the best candidates. Soapbox replaces the employee suggestion box, and uses employee up-voting to identify the most popular suggestions. 15Five replaces erratic communications between employees and managers with a simple weekly report that catches issues before they become major problems.

15Five’s weekly questionnaire

Summary – Consumerization of the Enterprise, Phase 2

Several people have suggested to me that we have reached the end of the era of big new SaaS applications. They see the main categories that they were used to in the past like Accounting, CRM, HR as being taken already by large public companies. They are often surprised by my answer: No, we’re at the beginning of a new era. The new era is about mobile and SaaS apps that rewrite the way that work gets done. And while they are at it, the user is delighted with consumer-grade, “beautifully simple” UI.

Strap-in and get ready for a fun ride. We’re finally in the fun phase of the “Consumerization of the Enterprise” revolution.

If you are developing an app that that rewrites how work gets done, my readers and I would love to hear more about it. Please tell us about your app, in one paragraph, in the comments section below.

(Disclosure: Zendesk, HubSpot, Namely, Lever and 15Five are Matrix investments.)