http://stujeffrey.blogspot.com/2007/11/enterprise-10-vs-enterprise-20.html

Enterprise 2.0 To Become a $4.6 Billion Industry By 2013

http://www.readwriteweb.com/archives/enterprise_20_to_become_a_46_billion_industry.php

April 20, 2008

A new report released today by Forrester Research is predicting that enterprise spending on Web 2.0 technologies is going to increase dramatically over the next five years. This increase will include more spending on social networking tools, mashups, and RSS, with the end result being a global enterprise market of $4.6 billion by the year 2013.

This change is not without its challenges. Although there is money to be made in the industry by vendors, Web 2.0 tools by their very nature are defined by commoditization; as is much of the new social media industry, a topic we touched on briefly here, when discussing how content has become a commodity.

For vendors specifically, there are 3 main challenges to becoming successful in this new industry, including:

1. I.T. shops being wary of what they perceive as "consumer-grade" technology
2. Ad-supported web tools generally have "free" as the starting point
3. Web 2.0 tools will have to now compete in a space currently dominated by legacy enterprise software investments

What is Enterprise Web 2.0?

Most technologists segment the Web 2.0 market between "consumer" Web 2.0 technologies and "business" Web 2.0 technologies. So what does Enterprise 2.0 include then?

Well, what it doesn't include is consumer services like Blogger, Facebook, Netvibes, and Twitter, says Forrester. These types of services are aimed at consumers and are often supported by ads, so they do not qualify as Enterprise 2.0 tools.

Instead, collaboration and productivity tools based on the concepts of web 2.0, but designed for the enterprise worker will count as being Enterprise 2.0. In addition, for-pay services, like those from BEA Systems, IBM, Microsoft, Awareness, NewsGator Technologies, and Six Apart will factor in.

Enterprise marketing tools have also expanded to include Web 2.0 technologies. For example, money spent on the creation and syndication of a Facebook app or a web site/social network widget could be considered Enterprise 2.0. However, pure ad spending dollars, including those spent on consumer Web 2.0 sites, will not count as Enterprise 2.0.

Getting Past the I.T. Gatekeeper

One of the main challenges of getting Web 2.0 into the enterprise will be getting past the gatekeepers of traditional I.T. Businesses have been showing interest in these new technologies, but, ironically, the interest comes from departments outside of I.T. Instead, it's the marketing department, R&D, and corporate communications pushing for the adoption of more Web 2.0-like tools.

Unfortunately, as often is the case, the business owners themselves don't have the knowledge or expertise to make technology purchasing decisions for their company. They rely on I.T. to do so - a department that currently spends 70% of their budget maintaining past investments.

Despite the absolute mission-critical nature of I.T. in today's business, the department is often provided with slim budgets, which tends to only allow for maintaining current infrastructure, not experimenting with new, unproven technologies.

To make matters worse, I.T. tends to view Web 2.0 tools as being insecure at best, or, at worst, a security threat to the business. They also don't trust what they perceive to be "consumer-grade" technologies, which they don't believe have the power to scale to the size that an enterprise demands.

In addition, I.T. departments currently work with a host of legacy applications. The new tools, in order to compete with these, will have to be able to integrate with existing technology, at least for the time being, in order to be fully effective.

Finally, given the tight budgets, there is still a chance that even if a particular tool does meet all the requirements to get in the door at a particular company, I.T. or other company personnel utilizing the service may try to exploit the free version of the service if the price point for the "enterprise" version gets to be too high. They may also choose to look for a free, open source alternative.

Enterprise 2.0 Adoption

How Web 2.0 Will Reach $4.6 Billion

All that being said, the Web 2.0 market, as  small as it is now, is, in fact, growing. In 2008, firms with 1000 employees or more will spend $764 million on Web 2.0 tools and technologies. Over the next five years, that expenditure will grow at a compound annual rate of 43%.

The top spending category will be social networking tools. In 2008, for example, companies will spend $258 million on tools like those from Awareness, Communispace, and Jive Software. After social networking, the next-largest category is RSS, followed by blogs and wikis, and then mashups.

The vendors expected to do the best in this new marketplace will be those that bundle their offerings, offering the complete package of tools to the businesses they serve.

However, newer, "pure" Web 2.0 companies hoping to capitalize on this trend will still have to fight with traditional I.T. software for a foothold, specifically fighting with the likes of Microsoft and IBM. Many I.T. shops will choose to stick with their existing software from these large, well-known vendors, especially now that both are integrating Web 2.0 into their offerings.

Microsoft's SharePoint, for example, now includes wikis, blogs, and RSS technologies in their collaboration suite. IBM offers social networking and mashup tools via their Lotus Connections and Lotus Mashups products and SAP Business Suite includes social networking and widgets.

What this means is that much of the Web 2.0 tool kit will simply "fade into the fabric of enterprise collaboration suites," says Forrester. By 2013, few buyers will seek out and purchase Web 2.0 tools specifically. Web 2.0 will become a feature, not a product.

Enterprise 2.0 Spending

Other Trends

Other trends will also have an impact on this new marketplace, including the following:

External Spending Will Beat Internal Spending: External Web 2.0 expenditure will surpass internal expenditure in 2009, and, by 2013, will dwarf internal spending by a billion dollars. Internally, companies will spend money on internal social networking, blogs, wikis, and RSS; externally, the spending patterns will be very similar. Social networking tools that provide customer interaction, allowing customers the ability to create profiles, join discussion boards, and read company blogs, for example, will receive more investment and development over the next five years.

Europe & Asia Pacific Markets Grow: Europe and Asia Pacific will become more substantial markets in 2009. Fewer European companies have embraced Web 2.0 tools, leaving much room for growth. Asia Pacific will also grow in 2009.

Web 2.0 Graduates from "Kids' Stuff":  Right now, it's people between the ages of 12 and 17 that are the more avid consumers of social computing technology, with one-third of them acting as content creators. Meanwhile, only 7% of those 51-61 do the same. However, this is another trend that is going to change over the next few years. By 2011, Forrester believes that users of Web 2.0 tools will mirror users of the web at large.

Retirement of Baby Boomers: As with many things, it takes the passing of the older generation from executive status into retirement before a true shift can occur. Over the next three years, millions of baby boomers will retire and the younger workers brought in to fill the void will not only want, but will expect similar tools in the office as those they use at home in their personal lives.

What It All Means

For vendors wanting to play in the Enterprise 2.0 space, there are a few key takeaways to be learned from this research. For one, they can help ensure their success in this niche by selling across deployment types. That is, plan to grow beyond just selling to either the internal or external market.

Another option is to segment the enterprise marketplace by industry and then by company size. Some industries are more customer-focused than others when it comes to the external market, so developing customized solutions for a particular industry could be a key to success. For internal tools, focusing efforts on deploying enterprise grade tools that include things like integration or security will help sell products to larger customers. Other  levels of service can be designed specifically for the SMBs, featuring simple, self-provisioning products to help cut down on costs.

Finally, vendors looking to grow should consider making a name for themselves in the Europe or Asia Pacific markets, where the opportunity comes from the expected increased investment rates for Web 2.0/Enterprise 2.0 in those geographic regions.

However, the most valuable aspect of this change for vendors is the knowledge they obtain about how to run a successful SaaS business - something that will help propel them into the next decade and beyond and, ultimately, will provide more value than any single Web 2.0 offering alone ever will.

Enterprise Mashups - Moving from Hype to Reality

http://ekive.blogspot.com/2008/04/enterprise-mashups-moving-from-hype-to.html

April 23, 2008

What is an Enterprise Mashup?:

1. Lightweight application
2. Developed inside the enterprise
3. Created by IT or business staff
4. Created in days not months
5. Uses a web oriented architecture
6. Often uses internal and external web services
7. Done at the data, logic and/or presentation layer.

Why Mashup?

1. Save money - Workflow mashup. Great lakes loan services. Integrating docusign web services achieved a 75% cost decrease
2. Save time -  Deal tracking and collaboration by Societe Generale. An upgrade took 3 days instead of 3 months
3. Save Effort - CRM mashup - PGP and Dunn and Bradstreet
4. Reduce the IT Backlog

Mashups are familiar

1. Lightweight composite applications
2. Portals and dashboards
3. Enterprise Application Integration
4. Extract, Transform and Load

Mashups are like these - just simpler and faster. Smaller scope means we can implement disposable applications because the time to value is orders of magnitude faster.

External Drivers for Enterprise Mashups

Web 2.0 is coming to the Enterprise with OpenAPIs. Web sites are becoming programmable services. APIs at programmable web are adding 120 APIs in Q1 2008. This is a 150% increase over the previous year.

Mapping is one of the most popular API sets. Enterprise API sector is now in the top 15 categories. Finance segment doubled in 6 months. Telephony, mobile and messaging now have over 50 APIs.

Internal Driver for Enterprise Mashups

• Getting the ROI from SOA.
• Enterprise Mashups already exist. Enterprises call this the Excel spreadsheet with cut and paste.

Mashups depend on a Web Oriented Architecture

1. REST - The way the web works
2. URIs and URLs - How everything is addressed
3. Open Data Formats - lain old XML, RSS, JSON and ATOM

• SOA comes from the middleware legacy and is more structured, static and top-down.
• WOA is more dynamic and simpler and is more application centric.
• Programmable Web maps APIs by type. 68% support REST. 29% support SOAP. REST is also growing much faster.

Data as a Service:  Xignite and StrikeIron 

Infrastructure Services: Webmetrics and Mashery

Professional Services: IBM and CapGemini

App Marketplaces: The AppExchange (Salesforce.com), Serena and Google Solutions Marketplace.

Where will you run your enterprise mashups?

There are a growing array of choices:

• Do it yourself
• Managed Hosting - Opsource
• Cloud Computing - Joyent, Amazon Web Services, Mosso
• Cloud Interactive Development Environments - Force.com, Bungee Connect
• Cloud Application Builders - Coghead

Top 4 Enterprise Mashup Challenges:

Taken  from Dion Hinchcliffe's Top Ten challenges:

1. Immature Marketplace - We are in the early adopter phase
2. SLA for APIs - Lack of SLAs is a barrier
3. Security - Access Rights, Identity, compliance and regulations
4. Data Quality and Trust - trust applies to internal and external data

Mashup advice for IT

1. Beware the hype
2. Make SOA a mashup platform - use open standards an expose services
3. Start simply
4. Think tools - to enable adoption and speed of creation
5. Add governance as needed

Addressing the challenges:

• Amazon and Google are addressing the SLA issue. Premium service offerings provide paid support.
• Vendor software will increasingly offer mashup capabilities in their tools. For example IBM Websphere can incorporate Google Gadgets in to the portal server. Salesforce.com has integrated with Facebook to bring social context to enterprise applications.

There is a lot of activity around scraping tools. This is seen as a stepping stone to allow the API enablement of existing applications. The other strategy is to use database extract tools.

Comparing Amazon’s and Google’s Platform-as-a-Service (PaaS) Offerings

http://blogs.zdnet.com/Hinchcliffe/?p=166

April 11th, 2008

The announcement this week that Google released a beta version of a robust cloud computing platform called Google App Engine that lets anyone build apps on Google’s renowned and highly scalable infrastructure underscored a key trend in the software industry today. Namely that software platforms are moving from their traditional centricity around individually owned and managed computing resources and up into the “cloud” of the Internet.

Google’s entry into a space that has been largely dominated so far by Amazon and its Elastic Compute Cloud — as well as a few smaller players like Bungee and Heroku — has turned the Internet cloud computing space into a fully-fledged industry virtually overnight. What makes these offerings so interesting is their promise to turn enormous amounts of operational competency and accumulated economies of scale (which are enormous in Amazon’s and Google’s cases) into a highly competitive new software platform, akin to Windows or Linux, except entirely hosted off-premises and on the Internet.

Figure 1: Amazon and Google both offer comprehensive PaaS solutions

In this way, instead of just offering applications over the Web in the form of Software-as-a-Service (SaaS), Amazon and Google are actually offering an entire Platform-as-a-Service because they provide the foundational upon which to build highly scalable and robust Web-based applications in the same way that the traditional operating systems like Windows and Linux have done in the past for software developers. But what’s very different about this model is that no longer is the platform itself “sold” to the customer who then takes responsibility for running and maintaining it. In this model, it’s the very operational capability of the platform hosting that is the primary value here (and it’s how such platforms are typically billed). This has far reaching implications to both the business models of PaaS vendors as well as their customers.

In the traditional world of software platforms, the cost of the first copy of the platform was enormous, often requiring companies to invest hundreds of millions before they could offer the platform to their very first customer. And while that’s still true with PaaS, now the economics of these new online platforms extend to 24×365 operations, which of course, is the core competency of the Web 2.0 era and. The potentially ruinous continuous expense of not only providing the platform but providing all the computing resources (and facilities, power, and bandwidth) upon which your customers run their apps changes the rules of the game. Whoever can drive the most costs out of their supply chain while offering a rich, robust, and easy-to-use platform is likely to rule the roost.

This takes us to the capabilities of these platforms, which are just now being fully fleshed out and offered to the marketplace in a form that’s relatively complete (though we’ll see which pieces are still missing in a minute.) What’s interesting is that Amazon and Google have strategically built up an extensive set of services over the last few years and have made some very interesting assumptions that will determine who their customers are (consumers, startups, enterprises) and what type of business models can sit on top of them (advertising, subscriptions, cheapest source of outsourced computing resources).

For its part, Amazon’s Web Services Division has continued to grow regularly with new introductions on a regular basis with strategic components like SimpleDB to highly innovative services like the Mechanical Turk. As for Google it has released a flurry of APIs and platform tools as well over the last few years with notable examples such as their famed Google Maps API, Google Base API, their little known but very intriguing Social Graph API, and now their new Google App Engine infrastructure which forms the center of their PaaS offering. As for enabling business models, Amazon has it’s eCommerce APIs to help its PaaS partners generate revenue while Google has its far more flexible and general purpose advertising models with its AdSense product line. In terms of capacity, Google currently has sharp limits on many of it Web services while Amazon has been impressively open-ended about “sky-is-the-limit” capacity ceilings. Finally, Amazon’s PaaS services are essentially a box of high quality pieces without much integration, while the advent of Google App Engine provides some real glue that begins to pull together an integrated platform solution for its customers.

Good for the startup community; but what about the enterprise?

The decision for many startups will be an easy one; the benefits of using these platforms for their new products are compelling across the board despite minor concerns about platform lock-in even though the models used by both companies are actually surprisingly lock-in free. Amazon’s computing cloud runs the machine images you provide, essentially running the platform of your choice while Google uses widely available and open sourced languages and frameworks like Python and Django. The support services such as data storage and others could easily be replicated via the interface/implementation separation if an application needed to be brought back in-house. Google’s cloud is more elastic than Amazon’s while Amazon gives you a bit more flexibility. Both PaaS platforms now have all the major pieces needed to be a relatively complete cloud-based application platform, with the exception that Amazon has decided not to offer PaaS client-side tools and has decided to let customers choose whatever they like. Google provides this flexibility too but also provides many compelling client tooling options of its own and it remains to be seen if ceding the client tooling entirely to its community will benefit or hinder Amazon’s offerings long-term.

But the decision for enterprises on how far to leverage computing platforms in the cloud will be much more complicated. The economics will increasingly make more sense to run business applications on these new platforms now that major competition has emerged in the PaaS marketplace that will put major downward pressure on already strikingly low costs to operate. But the issues around governance, security, privacy, and control will be hard to overcome. Make no mistake however, these platforms offer not only major cost savings but non-trivial productivity boosts as they competitively strive to be the cheapest and lowest barrier place online to run your business applications and engage your employees, customers, and partners.

Read an excellent technical overview of Google App Engine by O’Reilly’s Brady Forrest.

What’s fascinating is that Google and Amazon have emerged to be the leaders in this space while Microsoft, IBM, and especially Oracle and SAP are either well behind or have unclear plans to enter the PaaS space. Both of these companies formed their DNA around the world of the Web and deeply understand how to leverage the enormous strengths of the Web platform. Some analysts have recently declared that existing platforms such as Windows are collapsing under their own weight as well as facing rapidly growing competition from Web apps, which some have declared will have reached the 50% tipping point as early as 2011. It’s clear that the software marketplace is changing rapidly but it’s very unclear which of these emerging platforms will be a big hit with the enterprise. For now both of these platforms are primarily startup stories in terms of their customer base and that may not be enough for PaaS players to carve out the kinds of fast growth businesses we saw in the enterprise software industry for the last 20 years. As ZDNet’s Phil Wainewright declares, “Let the PaaS wars begin.”

Also worth reading: Garett Rogers goes into the pros and cons of using Google App Engine.

Enterprise 2.0 industry matures as businesses grapple with its potential

http://blogs.zdnet.com/Hinchcliffe/?p=173

April 22nd, 2008

Some of the big IT news over the weekend was the announcement that Forrester predicts that the Enterprise 2.0 space will be a $4.6 billion industry within 5 years. ZDNet’s Larry Dignan had the full breakdown yesterday on Forresters bullish outlook while Dennis Howlett immediatelytook umbrage with Forrester’s conception of the Enterprise 2.0 marketplace using a “loose definition and one that could be applied to any number of technology components from CRM through to supply chain management and pretty much anything between.”

Certainly that’s the challenge of pinning down something with a term that still doesn’t have industry consensus after two years, yet seems destined to be a vitally important space that our businesses are going to be moving to over the next few years. Enterprise 2.0 itself was originally defined by Harvard’s Andrew McAfee a couple of years ago in careful detail (early timeline) about something he called freeform, social, emergent software applications (such as blogs, wikis, but many others as well.) The enterprise software industry began carrying the banner ever since, applying Enterprise 2.0 to the next generation of countless marketplace offerings, often whether or not they were any of the things that seemed to make this new type of application unique and special.

Read The State of Enterprise 2.0, a thorough summary of this new software space.

The intent of creating this new term, however, was to capture a very significant change in the way that people use networked software, regardless of it was the genuine retooling of “big box” traditional IT software suites or the infiltration of subversive Web 2.0-style consumer applications across the firewall. Careful market segmentation for research tracking purposes and the debate over the inclusion of traditional, top-down IT systems into the definition of Enterprise 2.0 can be interesting exercises. But such efforts also miss the big picture and the long-term potential of this potentially potent new generation of enterprise software applications.

In my studies of Enterprise 2.0 adoption, there are two major methods by which these new applications take hold. The first is the traditional model where the IT department or some part of the business decides at a high level to adopt these new tools and begins the process of evaluation, acquisition, deployment, training and adoption. This is the traditional model that most IT large-scale software acquisitions still use today.

The other model is where individuals take it upon themselves to find the best solutions to a given problem at hand and solve them creatively and collaboratively at a grassroots level. This is becoming increasingly more common, particularly in organizations that are less strongly hierarchical and I’ve identified this story in many large organizations, from AOL’s stunningly rapid viral adoption of MediaWiki (the open source platform that runs Wikipedia) to the story of a large utility company getting ready to roll out Enterprise 2.0 only to find that the majority of departments had already adopted a solution on their own.

This second form of adoption is one of the hallmarks of this new model for using software to solve business problems and it speaks volumes to how different they are from the previous generation of applications. So it’s worth spending a little time understanding exactly why and how they are so different. To explain this, I often refer to John Hagel’s excellent work onpush vs. pull systems that goes directly to the heart of why 2.0-era software applications seem so different from the software we’ve used before to solve business problems.

In other words, we seem to be coming from a push-based era of command-and-control management and are heading into an era where more and more work is being conducted using a decentralized pull-based model that’s more scalable, efficient, and leads to increasingly innovative outcomes. This also demonstrates how the network effect driven model of the consumer Web can actively remake the internal IT landscape as competitive entries in the form of SaaS applications, mashups, and enterprise cloud computing. Thus these new software models can not only co-exist but will thrive and even push out existing “IT approved” applications.

New trends fostering Enterprise 2.0: More social, more adoption

And despite some parts of the enterprise community still debate whether applications like Facebook, Twitter, Friendfeed, and other social networking and media applications will have any lasting relevance to business, we are however tracking several important new trends this year:

The first is that more companies are adopting 2.0 tools intentially (for better or worse as we’ll see). 2008 is going to be the broadest year yet in terms of Enterprise 2.0 adoption and Gartner is reporting that half of all companies investing in 2.0 this year will be doing so for the first time.

The second is that the Enterprise 2.0 industry continues to look at the consumer Web as the model for how to make these applications work best. The upcoming release of the respected Enterprise 2.0 platform, SocialText, adds true social graph capabilities and will adopt OpenSocial as a model to leverage the fast-growing consumer ecosystem around social networking apps. We’re seeing a similar trend in other Enterprise 2.0 offerings as well in an attempt to bring the richness and robustness of the social computing ecosystems in the consumer world to the enterprise.

The results of pull-based software models

While most of us are familiar with traditional top-down methods for prescribing the use of IT to solve problems, it’s the new organizational capabilities that Enterprise 2.0 and pull-based models for working and achieving business goals that will be interesting to most businesses. What do these “new capabilities” appear to be at this stage? The picture is just emerging but it looks as these are some of the potential results:

• Ad Hoc Processes and Problem Solving. While prescribed policy and procedures will always have a place, workers on the ground often need to make on the spot decisions and develop their own solutions to problems as they occur rather than waiting for one to be developed. Enterprise 2.0-enabled environments can give workers access to the right information and talent to solve their problems and enable solutions.
• Cross-Pollinating Innovative Methods. Pull-based systems are good an enabling innovation, particularly across what are known as weak ties in far flung parts of an organization. Enterprise 2.0 tools are good at flatting the organizations and leading knowledge stream from every corner, allowing the sharing and leveraging of ideas not possible before.
• Competition-Driven Outcomes. In the top-down hierarchical model of management, there is less competition for ideas, solutions, and especially software. In a decentralized, bottom-up environment, multiple solutions can emerge and the best ones can win.
• Pervasive Social Computing Interactions. We are just beginning to understand how social computing is transforming the work landscape, as it already has the consumer world. A highly social enterprise seems to enable a higher level of collaboration, communication, organizational awareness, which leads to the improvement of processes depending upon these activities.
• Situational Software Solutions. Self-service is a classic hallmark of 2.0 solutions. The organic use of blogs and wikis to create simple dashboards and mashups is a commonly recurring theme in organizations deploying Enterprise 2.0 tools. Now, more and more businesses are looking at the potential for putting software creationdirectly into the hands of workers to enable solutions to be created for business situations as they occur.

The bottom line is that regardless of what it’s called, the industry around enabling pull-based business models and Enterprise 2.0 applications is going to be growing significantly over the next half-decade. These solutions will come both from the top of the organization as well as from the edge of the organization and will often have to be disentangled at the middle as these new applications cross-over into the highly-regulated “core” infrastructure of IT. The challenge will be learning how to apply these new models effectively to business while not strangling them with the traditional aspects of enterprise software that can greatly limit their potential and have led to poor outcomes and excessive structure in the past.

The good news: Most likely they will be hard to stop as Web 2.0 applications become increasingly commonplace in our organizations over the next few years. The bad news: Most organizations will take years learning how to create environments that fully allow the leverage of these tools.

Twelve best practices for online customer communities

http://blogs.zdnet.com/Hinchcliffe/?p=190

July 25th, 2008

One of the more significant Web 2.0 trends in business this year has been the advent of the Web-based customer community, where groups of like-minded individuals focus around a brand or a set of product and services come together and interact online. Far from the cynical marketing ploy that it can sometimes seem, customer communities often sprout up on the initiative of passionate customers. Successful examples of this includeXMFan around XM Radio, HDTalking for Harley-Davidson, and IKEAFANS on IKEA products.

It’s imporant to note that the communities above are vibrant, active, and absolutely not affiliated with the businesses that the communities are focused on. As a result, business are increasingly realizing they can reap benefits by attempting to foster these communities themselves, rather than hoping that a group of users will do it on their own. While this can be a risky proposition — garnering an active community of users successfully is still more art than science at the moment — the rewards are increasingly clear for those that are successful.

Numerous studies over the years have underscored the benefits of customer communities, ranging from the 2001 McKinsey-Jupiter Media Metrix showing that “customers of web community features generate two-thirds of sales despite accounting for only one-third of a site’s visitors” to the brand new Deloitte study recently highlighted by the Wall Street Journal that showed that over a quarter of community initiatives increased sales even while most business-sponsored customer communities struggled to achieve critical mass in terms of users.

Despite the growing body of research and studies, exact numbers for customer communities are still pretty hard to come by yet it’s clear from a number of sources that business are beginning to get community religion en masse. A couple of recent examples that demonstrate the kind of customer community initiatives that are emerging include Hyatt’s new Yatt’itcommunity for frequent travelers and the decidedly back-from-near-deathMember’s Project by American Express. Both are highly produced and attractive-looking communities, especially compared with the three successful grassroots communities I listed at the beginning of this post, but are struggling for customer engagement and participation nonetheless.

Deloitte’s Tribalization of Business customer community study is getting a lot of attention. View a Slideshare summary of the findings.

What then is the secret formula for building successful communities for your customers? Certainly there are well known success stories to examine for clues. One good example is Dell’s online community which it famously used for a corporate image turnaround last year and remains one of the most highly regarded and highly trafficked customer community properties. Another is SAP’s various customer communities, with over a million registered business and technical users and a high degree of participation.

What can we learn from these success stories and a rapidly emerging set of business practices? Quite a bit as it turns out. I’ve taken as as many lessons learned as possible from the available outcomes of customer community efforts, as well as my hands-on experiences, and the synthesis forms the list that you see below. Please note that like any of my lists, it’s not exhaustive, and you are welcome to add your own in Talkback below.

Best Practices for Online Customer Communities

1. Put the needs of the community first. Communities exist to serve the needs of their members, and in customer communities businesses can elect to become close-knit participants in good standing or keep the community at arm’s length. The most vibrant communities such as Dell’s or XMFan have a good relationship with at least a few key leaders in the sponsoring organization. But making sure the community has truly free rein to serve itself — even if it ends up recommending competitor’s products in some cases or becoming a venting zone for customer’s complaints — is essential for the community to thrive through open conversation, honesty, trust, and candor. This back-seat position can be a very difficult thing for some organizations to accept, much less encourage but the best organizations manage to do this with humility and a sense of mutual respect.

2. Community is mostly not a technology problem. There are literally dozens of capable community platforms in existence today. Almost all of them can be used to create a compelling community with the features that users will need to discuss, share ideas, brainstorm, complain, support, and moderate each other. I’ll do a round-up of these in an upcoming post, but whether you use Drupal, Joomla, or DotNetNuke (to name just three leading example), it’s safe to say that the biggest challenges you will have will be around the business challenges and social architecture of your customer community and not the technology, with the possible exception of emerging community architecture standards such as OpenSocial andDataPortability.org.

3. Active community management is essential. When Josh Catonerecently analyzed some of the findings of the new Deloitte community study, he noted that one of the big takeaways was that most customer communities lack proper management. Communities are indeed self-organizing, but like community of any kind they require active administration, management, and moderation or the community will devolve into a least common denominator environment where abuse, spam, neglect, inactivity, and poor behavior of a few go unaddressed and drive away productive participants.

The most successful community management also is very proactive and goes out the way to draw in the best new participants and contributions to ensure the community has a substantial foundation that will hold on to members long enough for it to form a cohesive identity and a strong network of relationships amongst its members. This is one of the most consistent observations in the online community world: well-resourced community management is apparent in every one of the successful online communities I’ve come across.

4. Measuring success with community requires new yardsticks. Unique visitors is one often cited community metric that I’ve come across numerous times. Experience share is another, probably more relevant measurement that cited more often these days. But communities offer much better benefits far beyond the sheer visitor count or community size. Often the most influential members of an organization’s customer base will be active in online communities, both forming a draw for other members but also shaping community and public opinion in a forum that is mutually vouched for by the community and its sponsoring organization.

Beyond just behind home for influencers, communities form a qualitatively new type of relationship with a customer base and it’s interesting to note that while Dell does cite page views as part of its community success, it also cites the large number of new ideas that customers have submitted, the value which can’t possibly be measured in terms of traditional Web analytics. While many customer community budgets will continue to be approved on the basis of very Web 1.0 metrics, pushing hard for new ways of measure value will be essential, particularly has communities will interface with organizations across just about every major business function sooner or later, and not just marketing and PR, even though that’s where many sponsored customer communities start life.

5. Consumer social networks, grassroots customer communities, and business-initiated customer communities are closely related yet very different creatures. A quick glance at a few of the customer communities listed above as well as some of the larger, more active customer groups in Facebook, shows how different they can be. Primark (a U.K. retailer) probably has the largest existing commercial Facebook group, with over 94,000 members and a level of participation that would make it the envy of most customer community efforts. The unforced and natural user experience of grassroots communities such as XMFan and HDTalking is also probably not coincidental in their success, most likely making it seem a less-corporate and more relaxed setting for participation. The lesson here is that customer communities come in many forms and understanding the motivations, expectations, participation styles, conversational modes, and desired user experience will be required learning as we undestand what our customers are really seeking from online communities based on interest in products and services.

6. Customer communities do work as a marketing channel, just not in the traditional way. It’s probably safe to say that customer communities are a solid marketing channel for an organization. The recent Deloitte study mengtioned above confirmed that fact consistently in a number of ways. But the benefits often come in unexpected ways include the community becoming a place where the latest “unofficial” news is exchanged or leaked, where visitors can expect to have non-hierarchical contact with an organization’s employee, with the attendant increased flow of oft-unapproved information, and other communication is conducted, both subversive and otherwise. Customer communities tend to project customer influence and demands deeper into an organization and create more sustained contact. And the reverse is also true, with the result being outcomes which don’t appear so much as marketing but as cooperation, mutual brainstorming, and co-development of ideas and outcomes.

7. The more the business is integrated, the better the community will work. One of my favorite stories was of a community manager informing the organization that on day one, the community will be “90% us and 10% them. Give me your involvement, and a year from now it’ll be 90% them and 10% us” and this result was borne out. Customer communities in reality are joint communities of the business and the customer both. Deep involvement by both as early as possible and from many parts of the organization will create the early critical mass that can avoid the low-levels of participation seen in many organization-initiated customer communities.

8. Growth will come, but not until a community finds its identity. To expect something based on social dynamics as much as community is to be predictable and grow linearly just doesn’t reflect reality. Many communities struggle for a while until they catch their stride when they reach the right participants, or offer the right means of engagement such as using a different model such as a social network instead of discussion forums (or vice versa.) While pilots can help find some good models early on, only sustained contact with customers will find out what they really need in a community. The first community may be the on that provides the necessary input to create the “real” community. Such organic growth models can be hard to embrace from a process and expectations standpoint, but are more likely to return meaningful results in the medium to long term.

9. Mutual ownership and control of communities enables trust and involvement. Like so many things in the Web 2.0 era, giving up some control of the community to the community itself is the surest way to get buy-in and to make sure that the participants in the community can make it into what they want it to be. As with Enterprise 2.0, communities are excellent change catalysts, as long as you allow them to be.

10. Most communities are highly social entities, and the rules of social engagement apply. Certain general rules seem to apply to communities, such as allowing like-minded individuals to self-organize into sub-groups, protecting conversations from scale, rewarding members that do good works, and so on. Imposing artificial rules that are counter to natural social inclinations are likely to invoke dissonance and prevent natural communities from forming as they should. The basic rules of social media apply here.

11. Going to the community, instead of making it come to you, is a risky but increasingly viable strategy. I’ve heard and been involved in a lot of discussion about social networking and community fatigue and how users are more likely to be comfortable using their existing social sites for customer interaction. The jury is still out on this despite the fact that initaitives like OpenSocial are indeed likely to make it cost effective to go to the customer across hundreds of open social networks in a single act. However despite the risk, the relative ease of doing so makes the risk and investment likely worth it in many cases. That doesn’t mean such community channels don’t bring with them major restrictions in control, governance, and data ownership. Use with care, but at the very least such “go to the user” strategy can be an important plank in driving membership and participation.

12. Connect the community with the other CRM-related aspects of the organization. Customer communities have been used successfully for customer service, the generation of innovation, trend spotting, marketing, lead generation and many other activities. In the future, it’s likely that many customer communities will blur extensively with the organizations they are associated with and become more and more closely involved with their customers in a wide variety of activities. Those organizations that can do this successfully will likely reap rewards of efficiency, innovation, producticity increases and others, while assuming some of the risks involved in any sort of crowdsourcing activity.

Recently, I’ve been seeing tremendous interest in community aspects to almost all customer-facing online activities. And by the very nature of community, this will have varying levels of success based on whether the community is already thriving to how well its integrated into the activity and if it provides sufficient motivation from the customer. I made point #1 the first because of the most common attitudes is an overriding “What’s in in for us” view towards investing in community efforts. While this is clearly tied up in entirely valid ROI discussions, the bottom line is that if customers needs are put first, the value will quickly emerge. Just ask those with successful communities whether it was worth the investment. The answer I’ve always received has been enthusiastically in the affirmative.