I recently wrote on this blog on why the enterprise 2.0 market might continue to grow in a down market, see Awareness Report Shows Significant Rise in Enterprise Social Media - Will It Continue? My blog colleague Jevon MacDonald covered the concept in more depth in his post, In uncertain times, Enterprise 2.0 takes the stage. I really like the series of points Jevon made. He concludes with this statement, “In a time of uncertainty such as we have seen in the past several months, new and promising technologies may prove to be the safest harbour for those who must continue to deliver growth.”

Forrester is leader in promoting the enterprise 2.0 market. More recently, Oliver Young provided a new report with some cautions, Vendors: Prepare For Falling Prices For Enterprise Web 2.0 Collaboration And Productivity Apps. It was likely written before the recent market downturn. The summary states, “The enterprise Web 2.0 market is experiencing an explosion of activity among enterprises seeking collaboration and productivity improvements. While that explosion is placing Web 2.0 technology in the hands of millions of knowledge workers, cutthroat competition, commoditization, bundling, and subsumption are all offsetting the associated license revenue growth. How bad will it get? Forrester expects that most Web 2.0 tools will experience falling average deal sizes over the next five years, with some deal sizes dropping by more than half. Product managers must take steps today to manage increasingly competitive times ahead.”

Part of this prediction is the normal evolution of new software markets. Oliver points out that in many cases the tools have moved into a period of refinement rather than breakthrough innovation. This may be largely true but I still see some new genres or expansions on existing ones as I interview application suppliers for the AppGap blog.

His next major point is that bundling creates a more homogenous set of competitors. Here I completely agree. Many of the best of breed providers are moving away from their initial starting point (e.g., blog, wiki, social networking, etc.) to providing more a consolidated suite or platform. The newest entries such as smaller players like Qtask and big guys like CiscoWebEx are talking about integrated platforms. Others like Attivio are combining capabilities (business intelligence and enterprise search in their case). Even Microsoft, which announced a number of integration capabilities with best of breed vendors, is moving to adding a lot of those capabilities into Sharepoint – see upcoming Sharepoint investment areas.

Oliver then talks about subsumption (a word surprisingly not liked in the Microsoft spell checker) which is an extension of bundling. He writes, “Microsoft and SAP, are rolling Web 2.0 features into existing software packages; in many cases, they are providing the technology at no extra cost. Microsoft, for example, bundles lightweight blogging and wiki tools into SharePoint.” My recent experiences with Sharepoint implementers supports this idea.

Getting down to details, Oliver predicts the price for blogs and wikis will fall the most. They were part of the original selection of web 2.0 tools so this makes sense, especially as other tools have picked up some of their breakthrough functions like project management. He says that social networking will follow blogs and wikis and become commoditized with Sharepoint being a major reason. On the brighter side, Oliver predicts that mashups will continue to grow in maturity and use. Once again I agree with Oliver as mashups become more of the underlying plumbing in enterprise 2.0 tools like Deki for CRM. Mashup providers like Serena should do well as they refine their offering and firms like Nexaweb that use mashups for deep enterprise application integrations should also do well.

There is much more and I recommend the report. I wonder how these trends that support some falling process might intersect with the potential for increased demand that Jevon mentions and I referenced in the opening paragraph of this post.