Innovation, startups hot again in the enterprise

Five years ago enterprise startups hit the skids, stung by a perfect storm of commoditization, vendor consolidation, and the IT spending downturn. In the intervening years, however, the skies have cleared and, to paraphrase Ronald Regan, "It's morning again for enterprise startups."  

InfoWorld has declared May the Month of Enterprise Startups. Each day this month, InfoWorld will profile a different startup company in the enterprise space. By the end of May, we hope to have catalogued some of the promising new technologies that will be working their way into your cube in the coming years.

The next two years will be critical for many of the early-stage enterprise companies, which have been out of favor with investors and customers for so long it's hard to remember their last heyday -- in the client/server-dominated 1990s. A mere handful of big winners emerged from that dark period: names like Salesforce.com, VMWare, and Red Hat.  For many of their peers, which often lacked a complete solution or strong distribution capability, success meant getting acquired rather than thriving as a stand-alone company. Even as recently as this year, companies such as Webex and Tellme Networks have continued to capitulate to the lure of M&A.

The crop of enterprise startups that we'll profile this month could be different. For starters, venture capitalists have soured on enterprise deals in favor of consumer plays, so they aren’t funding as many look-alike companies for every enterprise idea, as they did in the late 1990s. (Remember the B2B craze?) That leaves more competitive breathing room for those that do get funded.

Second, the open source movement has provided a rich array of cheap tools and platforms that enterprise startups can innovate on top of, enabling them to deliver more value-add to customers with less capital invested in plumbing. Third, the worldwide IT market has grown, especially globally, over the past five years -- and that means more customers and budget dollars (or Euros, Yen, and Yuan) to go around.

But most important, enterprise customers are back in innovation and experimentation mode, and more are open to working with startups than they were in the brutal 2002-2005 era of "consolidation."

The companies on our list cover the waterfront of enterprise needs: security, open source tools, analytics, e-commerce, storage -- you name it. A few areas in particular are worth highlighting. First, software as a service now has proven traction and demonstrated disruptive potential in enterprise environments. Second, the SMB market (small and medium-size customers) is finally getting tech savvy and begging for new, innovative IT products. But large vendors, used to selling to the Fortune 500, don’t necessarily have the right products or perspective to meet SMB needs, despite their desire to do so.