Social Software? Big Tech Buys Into On-line Network Model To Spur Sales

The question is, will this improve sales or this is this functional equivalent of Hollywood thinking 3D movies were the next big thing? By Cari Tuna at the Wall Street Journal:


"Borrowing a page from Facebook Inc. and Twitter Inc., a growing number of technology giants and software start-ups are trying to make business applications more "social," as business-software vendors and customers look to take advantage of people's growing interest in social networking.

But corporate technology buyers said tapping such software poses some challenges, such as justifying the costs of the software and ensuring that corporate information remains secure.

Over the past few years, software makers such as Microsoft Corp., International Business Machines Corp. and Cisco Systems Inc. have incorporated social features, like status updates and information feeds, into their software. IBM's Lotus Connections application, for instance, offers users recommendations for co-workers, topics and other information to "follow."

Recently, the trend has picked up steam. In January, Tibco Software Inc. launched tibbr, an online tool that allows co-workers to follow each other at work, as well as alerts generated by other business applications.

Employees access tibbr over the Internet. The software costs $12 a user per month and can be offered as a service by Tibco or installed on a company's own server systems. Tibco Executive Vice President Ram Menon said the "social approach" allows tibbr to surface relevant information for users quickly, compared with traditional enterprise applications, in which users must seek out information more proactively.

Another difference: traditional enterprise applications often serve specific functions such as supply-chain management, while social business applications typically are meant to make workers more productive generally, by helping them communicate in more effective ways.

Research firm IDC estimated that spending on social business applications will grow to $630 million this year from $370 million in 2009.

Start-ups are getting in on the act too. Jive Software Inc. offers software that allows organizations to build and manage their own social networks, among other applications, and has said it aims to file for an initial public offering this year. "We're not trying to be Twitter or Facebook," said Jive Software Chief Executive Tony Zingale. "We're trying to facilitate getting work done in a much more productive fashion [and] drive costs down."

Meanwhile, Yammer Inc., which sells a microblogging and social-networking service for businesses, landed $25 million in venture funding in November.

"It's hard to think of a company that isn't selling enterprise social [software] now," said Forrester Research analyst Rob Koplowitz.

Salesforce.com Inc. recently launched its latest version of Chatter, an offering first released this past June that is styled after Facebook and lets co-workers at companies post updates and share files, among other features.

The social trend is being driven by the popularity of social networks among consumers, especially by workers who tweet and use Facebook and other social sites in their personal time. "The generation that's coming up, this is really the way they interact with each other," said Charles Beard, chief information officer at defense contractor SAIC Inc., which has tested an internal social network for its workers.

Mr. Beard and other CIOs said while the software offers benefits, it also poses some hurdles. Social enterprise software is sold through a hodgepodge of approaches, and prices for the software vary depending on the delivery model and how many employees at a company use the application.

The cost is giving Ray Barnard, CIO at Fluor Corp., some pause. In 2009, Fluor began building an internal social network using Microsoft's SharePoint software, which now is available to around 500 of the engineering-and-construction firm's 29,000 employees. Information-technology workers and engineering fellows, who generate intellectual property, use it to share information, collaborate on projects and vote on ideas, he said.

Mr. Barnard said he is now in talks with Microsoft and IBM about setting up a corporate social network for 1,000 to 15,000 Fluor employees. But a limiting factor could be cost, he said, adding that those vendors would charge Fluor $5.25 to $6 a user per month for delivering the software over the Internet. Fluor is also considering hosting the software on its own servers—an approach that would come with additional maintenance fees, he said.

Mr. Barnard said he is also looking at software from several start-ups, which would charge $1 to $4.50 a user per month.

Eaton Corp. CIO Bill Blausey said the Cleveland-based maker of electrical and hydraulic parts tries to measure the value of its internal social network, which also is built on SharePoint. Mr. Blausey said Eaton's initial investment in the software and related consulting services was between $900,000 and $950,000 and that it spends "a couple hundred thousand [dollars] a year taking care of it."

The software, which Eaton began rolling out in 2007, is available to roughly 12,000 of the company's 70,000 employees and is organized around virtual groups based on employees' professional interests and areas of expertise.

Mr. Blausey said users are asked to regularly quantify the costs saved or revenue generated due to the social network. He said the software generates or saves "several hundred thousand dollars" for Eaton annually. For instance, IT support staffers in different locations use the software to post information about excess equipment, thereby preventing colleagues from unnecessarily ordering new gear.

"Before we were very siloed. If you handled folks in California…You didn't talk much to the support people in Pennsylvania," said Israel Maya, an IT support manager at Eaton who uses the software. "It has united our team."

Security is also a concern for some customers. SAIC, the defense contractor, started testing an internal social network in 2009, eventually offering access to about 1,000 of its 45,000 workers, said SAIC's Mr. Beard. But the company shut down the pilot less than a year later, partly because the software didn't provide SAIC with sufficient control over what types of files employees could share.

Now, SAIC is looking at alternatives, including technology that would allow the company to control which employees have access to certain software features. "We want the good aspects of [social business software] without the negative consequences," he said. "We think we can thread that needle."