Web 2.0 has corporate America spinning

By Robert Hof

updated 3:25 p.m. ET June 6, 2006

Silicon Valley loves its buzzwords, and there's none more popular today than Web 2.0. Unless you're a diehard techie, though, good luck figuring out what it means. Web 2.0 technologies bear strange names like wikis, blogs, RSS, AJAX, and mashups. And the startups hawking them — Renkoo, Gahbunga, Ning, Squidoo — sound like Star Wars characters George Lucas left on the cutting-room floor.

But behind the peculiarities, Web 2.0 portends a real sea change on the Internet. If there's one thing they have in common, it's what they're not. Web 2.0 sites are not online places to visit so much as services to get something done — usually with other people. From Yahoo!'s photo-sharing site Flickr and the group-edited online reference source Wikipedia to the teen hangout MySpace, and even search giant Google, they all virtually demand active participation and social interaction (see BW Online, 9/26/05, "It's A Whole New Web"). If these Web 2.0 folks weren't so geeky, they might call it the Live Web.

And though these Web 2.0 services have succeeded in luring millions of consumers to their shores, they haven't had much to offer the vast world of business. Until now. Slowly but surely they're scaling corporate walls. "All these things that are thought to be consumer services are coming into the enterprise," says Ray Lane, former Oracle president and now a general partner at the venture capital firm Kleiner Perkins Caufield & Byers (see BW Online, 6/5/06, "A VC's View of Web 2.0").

Corporate bloggers
For all its appeal to the young and the wired, Web 2.0 may end up making its greatest impact in business. And that could usher in more changes in corporations, already in the throes of such tech-driven transformations as globalization and outsourcing. Indeed, what some are calling Enterprise 2.0 could flatten a raft of organizational boundaries — between managers and employees and between the company and its partners and customers. Says Don Tapscott, CEO of the Toronto tech think tank New Paradigm and co-author of The Naked Corporation: "It's the biggest change in the organization of the corporation in a century."

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Early signs of the shift abound. Walt Disney, investment bank Dresdner Kleinwort Wasserstein, and scores of other companies use wikis, or group-editable Web pages, to turbo-charge collaboration. Other firms are using button-down social-networking services such as LinkedIn and Visible Path to dig up sales leads and hiring prospects from the collective contacts of colleagues. Corporate blogging is becoming nearly a cliché, as executives from Sun Microsystems chief executive Jonathan Schwartz to General Motors Vice-Chairman Bob Lutz post on their own blogs to communicate directly with customers.

Just as the personal computer sneaked its way into companies through the back door, so it's going with Web 2.0 services. When Rod Smith, IBM's vice-president for emerging Internet technologies, told the information technology chief at Royal Bank of Scotland about wikis last year, the exec shook his head and said the bank didn't use them. But when Smith looked at the other participants in the meeting, 30 of them were nodding their heads. They use wikis indeed. "Enterprises have been ringing our phones off the hook to ask us about Web 2.0," says Smith.

One giant computer
Also just like the PC, Web 2.0's essential appeal is empowerment. Increasing computer power, nearly ubiquitous high-speed Internet connections, and ever-easier Web 2.0 services give users unprecedented power to do it themselves. It doesn't hurt that many of these services are free, supported by ads, or at their most expensive still cost less than cable. "All the powerful trends in technology have been do-it-yourself," notes Joe Kraus, CEO of wiki supplier JotSpot.

In essence, these services are coalescing into one giant computer that almost anyone can use, from anywhere in the world. When you do a Google search, for instance, you're actually setting in motion an array of programs and databases distributed around the globe on computer hard drives. Not only that, people who tap services such as MySpace, eBay, and the Internet phone service Skype actually are improving the tools by the very act of using them. MySpace, for instance, becomes more useful with each new contact or piece of content added.

The collective actions, contacts, and talent of people using services such as MySpace, eBay, and Skype essentially improve those services constantly (see BW Online, 6/20/05, "The Power Of Us"). "We're shifting from a presentation medium to a programming platform," says Tapscott. "Every time we go on these sites, we're programming the Web."

Problem solving
Not surprisingly, a lot of executives remain skeptical. For some, it's hard to imagine the same technology that spawns a racy MySpace page also yielding a new corporate collaboration service. "There's a big cultural difference between the Web 2.0 people and the IT department," notes consultant John Hagel, author of several books on technology and business. More than that, information technology managers naturally don't want people using these services willy-nilly, because they're often not secure from hackers or rivals.

Nonetheless, the notions behind Web 2.0 clearly hold great potential for businesses — and peril for those that ignore them. Potentially, these Web 2.0 services could help solve some vexing problems for corporations that current software and online services have yet to tackle.

For one, companies are struggling to overcome problems with current online communications, whether it's e-mail spam or the costs of maintaining company intranets that few employees use. So they're now starting to experiment with a growing array of collaborative services, such as wikis. Says Ross Mayfield, CEO of the corporate wiki firm Socialtext: "Now, most everybody I talk to knows what Wikipedia is — and it's not a stretch for them to imagine a company Wikipedia."

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