Web 2.0’s Enterprise Wave [The Next Net]

The promise of Web-based enterprise software has been a long time coming.  But for the past few years the only real standout in this category has been Salesforce.com, which now has more than half a million paying corporate subscribers and is on track to hit nearly $500 million in revenues this year. 

But lately I’ve noticed that some newcomers are gaining traction delivering Web 2.0 software to corporations.  These include Zimbra, Success Factors, and Rearden Commerce (which just got a $22.5 million investment from American Express).

Zimbra (an original Next Net company) now has about 4.5 million individual paying subscribers using its Web-based corporate e-mail, contact, and calendar software. And it only just launched last February. At a bare minimum, Zimbra is getting $1/user/month, CEO Satish Dhamaraj tells me, noting that the vast majority of his subscribers come from bulk deals through ISPs, and for corporate customers he gets $28/user/month or more.  So Zimbra is making at least $4.5 million per month (or about $50 million a year) in revenues.   Dhamaraj told me last week that his startup is not yet profitable, but it is “pretty close.”  He added:  “We are growing more than 100 percent in both revenues and customers, quarter over quarter.”  That’s sequentially.  “Next quarter we are going to double,”  he affirmed.  (Dhamaraj didn’t show me any audited financial statements to back up this claim, so I am taking him at his word).

SuccessFactors,
which is an on-demand, Web-based performance-review application, is
also growing like a weed.  It started three years after Salesforce.com,
and already has 2 million users spread across nearly 900 companies,
including Kimberly-Clark, Marriott, and Wachovia.  At $50 a pop, that
suggests revenues of at least $100 million (of course, with volume
discounts it could be less).  CEO Lars Dalgaard wouldn’t confirm the
exact number for me when we spoke recently, but he did say, “In 2005 we
grew exactly 99 percent and in 2006 it will be over 130 percent."  He
says the company was profitable it’s first four years, but it is not at
the moment as he plows more money back into growth even more
opportunities.

And then there is Rearden,
which has been struggling to gain traction for the past six years for
its Web marketplace for business services.  With the Amex deal, Rearden
will power a part of American Express Business Travel’s Website for
booking things like cars, airport parking, package shipping, restaurant
reservations, tickets, and conference calls.  Think of Rearden as an
eBay for corporate services that lets each company customize what their
employees see based on the contracts and expense policies each one has
in place.  But—like Salesforce or Zimbra or SuccessFactors—the software
is hosted on the Web, making all the complexity and integration go away
for the companies using it.

Even when customers are given a choice between a hosted Web app and
the old-fahshioned client-server app that sits in their data centers,
they are now opting more and more for the hosted app.  Zimbra, for
instance offers both because some companies for compliance and other
reasons simply need to host their own e-mail.  "We don’t want to go to
the extreme Benioff position of saying, ‘If you don’t want it hosted,
don’t talk to us,’" says Dhamaraj.  Yet 80 percent of his customers
would rather that he deal with all the hassles of running e-mail
servers.  (And since the software is hosted, he can keep adding features, like spreadsheets and a word processor and the ability soon for compliance officers to search through multiple mailboxes at the same time).

Those enterprise IT folks are finally catching on.