First Take Analysis: Jive Fills Warchest, Ready to Battle Enterprise Software Giants, IPO

By Industry Analysts, R “Ray” Wang @rwang0 (Enterprise Strategy) and Jeremiah Owyang, @jowyang (Customer Strategy) both founding partners at Altimeter Group

Community Platforms Evolve to Social Business Category
Having tracked the social business category for some years now, and have been watching the category grow, and expand into other niches.  At first, the community platform space (like Jive) was insular, focused on only on enterprise communities, but has now grown into Social CRM, Application Platforms, Social Media Management Systems, Brand Monitoring, corporate email systems and eventually to deliver a customer experience that’s native to the customer. It may be social, it may be mobile, it may take even radical forms in including in store displays.

The Situation – C Round Funding
Jive, who recently raised a $15mm in 2007 has capped off their war chest with a hefty $30mm ‘C round’ for a total of $57.5 million in total.  Why this large amount?  ‘D rounds’ are virtually non-existent out of Sand Hill road, and if they need investment they’ll have to get from a partner corporation.

Altimeter Group SWOT Analysis

Strengths:
Jive has been hailed as a leader in the social software class, (Forrester Wave, and three Gartner Quadrants), and continues to show growth with large clients, claiming sales in the range of “$75,000-$150,000 per customer, closed ten $1 million deals, four of which closed in the last two quarters. While Jive is not yet cash-flow positive, he company has 3,000 customers, 15 million users, and will end the year on a $100 million run-rate” (source).  Their recent acquisition of brand monitoring company FiltrBox demonstrates the pre-cursor of SCRM systems, and have made a variety of strategic partnership including with early-to-market social business consultants Dachis Group.  They’ve recently hired a new CEO, Tony Zingale who is a seasoned leader of Mercury Interactive, where he clinched $1B revenues and lead a $5B acquisition to HP.  Lastly, they’ve shifted HQ from Portland to tech (and VC) centric Palo Alto.

Weaknesses:
They’re undergoing a cultural shift from a hip Portland startup, to becoming a tried and true enterprise player.  With a new CEO (Tony Zingale), and with a new CMO (Kiker has moved on) to take the helm soon, they’ll have to undergo both an internal mindset change as they shift to battle enterprise players.   Also, as Jive takes on larger clients, they risk alienating their small and medium size clients who can’t afford, or can’t scale with Jive’s new value proposition.

Opportunities:
Expect this war chest to be used to bolster the sales and marketing team.  C-rounds often focus on getting the company ready for a “material” event.  Jive will most likely use this time to build out significant partner channels and business development with enterprise clients.  Platform investments should support new partner models that support value added service growth.  Altimeter expects Jive to focus on bookings and immediate recurring revenue in order to maximize value for a “material” event.

Threats:
Key threats come from larger vendors who may suddenly gain a “social” religion, they’re moving from dominating the small pond of community platforms to big and must bolster for a new type of battle in the enterprise application market.  Should an Oracle or SAP decide to enter the market, it may make overtures for an acquisition.  Salesforce.com and RightNow are the biggest CRM threats as they have integrated with key social business constituents and Chatter offers competitive features on an existing footprint of customers. Mainstay social business platform Microsoft Sharepoint can continue to win favor through having a large direct and channel sales force, and new vendors like Broadvision who stem from a traditional eBusiness heritage.  Although they’ve been compared with Lithium in the past, we don’t see them as a direct competitor as both these vendors will develop friction directly with the larger enterprise software players.   Jive’s CEO Tony Zingale has been quoted as diminsihing the incumbents as having Social media “bolt on” features and Jive bloggers are already throwing bombs at CRM vendors.  Yet, expect these incumbents to use their existing enterprise footprints, CIO relationships, and direct and channel sales teams to their advantage.

Altimeter Group’s Take

  • Jive has hit a milestone moment, as this 30mm dowry prepares them to move into a new category, this is an accelerant.  This money will be used for rapid expansion as organic growth will not be enough to achieve velocity that existing enterprise incumbents may already be able to leverage.
  • Jive must partner with more system integrators, enterprise class software vendors, and integration providers to gain a solid foothold with enterprise buyers.  The money is clearly in the enterprise buyer market where existing ERP, CRM budgets can be gleaned.
  • Expect Jive to bolster recurring revenues, and stabilize growth, and prepare for an IPO in 2011 –an achievement we haven’t heard much about here in Silicon Valley for nearly 10 years.

The Bottom Line For Competitors – Don’t Be Last To Play Catchup
Market and solution footprint consolidation will continue around the key components of social business.  Expect market laggards and legacy competitors to work out their build/buy decisions over the next 8 to 12 months.  Most legacy software vendors lack not only the R&D prowess, but also the DNA to successfully launch a social product.  Early consolidators will gain the best deals.  Laggards will be odd man out during the rapid consolidation in the next 18 to 24 months

The Bottom Line For Buyers – Invest In Jive But Keep Them Vested In Your Success
Jive will emerge as one of the winners in providing social business solutions.  The company has the potential to IPO and succeed as an independent provider.   Other competitors will emerge and play catchup over the next 24 months.  However, should an IPO event succeed, the funding will provide Jive with the war chest to go after adjacent competitors and build out its base.  During the journey towards an IPO, customers and prospects must keep the management team focused on investing in successful deployments and outcomes, ensuring they get rapid service and support despite focused on top line growth.


The Altimeter Group is a Research Advisory firm focused on disruptive technologies, located in San Mateo.  We believe in openness, and disclose our clients with their permission, as a result, we hope you’ll trust us more.

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  • Interesting news about Jive Software. However, the analysis skips over a very important issue for being a true enterprise focused software provider: Analytics and Reporting. Under your weakness analysis, this should be an area of concern for Jive and its executives. While they are moving faster than most to correct this situation by brining in SAP's Business Objects tool, they are still far off from where most enterprise companies desire. (In fairness, most of the social media/community/CRM platforms are not where they should be as this area has always been an after thought.) Their reporting platform still requires far too much manual input to align with other enterprise ready web analytics platforms such as Omniture. This is a weakness. A threat to Jive's current rankings is the ability of another platform provider to create better api's to link into the metrics/analytics reporting capabilities of the major players. Who could do this? Lithium for one, RightNow for another, and perhaps others. I would be very cautious of placing Jive's platform too far ahead of others in this area. Enterprise clients require enterprise level reporting. We do far too much manual work for our Jive clients such as Cisco and NetApp for this not to be an issue of concern for anyone at the enterprise level purchasing software positioned as “enterprise” ready. Perhaps part of this new round should go to upgrading that versus the sales and marketing efforts you mention above.

    A second weakness is their roadmap of 'enhancements' and upgrades. With a six month cycle, enterprise customers can often find themselves one or two versions behind facing orphaning of support for the version they are on unless the continue to pay to upgrade to 4.1, 4.1.1, 4.5, etc. Budgets are still tough to come by, so this model of constant upgrades may come back to bite them. How many of Jive's clients are on the 3.X platform while development is focused upon 4.5 and up? What does it say to clients if they are going to stop supporting 3.X versions as of March 2010? While I understand that all platforms evolve, it takes time and money for companies to upgrade versions. Not all are ready or willing to do so just because a new widget is added. To compare with a true enterprise level platform provider, SAP kept its support for its R2 products for close to four years after it introduced its NetWeaver technology, MySAP platform, and other enhancements. A true customer focused enterprise grade software company should be looking to the future while also taking care of its early customers too.

    So, you may be thinking that I'm a critic of Jive. Actually, I am a fan of what they are doing. We have multiple clients running Jive SBS and the Business Objects reporting tool. Most of them are very happy with Jive. Our consultants recommend Jive software for the right situations. So, this is all meant as feedback from the field and not as an attack.

    I just think that before we annoint a company as the Enterprise leader or some such thing, the terms ought to be defined in terms of customer needs not just a set of functions or ambitions.

    Mike Rowland
    Impact Interactions

  • Thanks Mike, I really appreciate this thoughtful comment, I've pointed to a few people to take a look too.

  • Mike – great points on the analytics and reporting. As SCRM vendors mature, there will need to be significant investment in the intelligence layer. This layer will have to take into account both social intelligence and integrate back into BI and decision support systems. (see Next Gen BI report http://blog.softwareinsider.org/2010/06/28/tues…)

    As for enhancements and upgrades, many of the best practices and hopefully none of the worst practices will evolve as the leaders in SCRM make the move to solve enterprise class issues. QA and QM will also have to improve. UX and UE will also need to be consistent across the many modules.

    Great points.

    – R “Ray” Wang
    http://www.softwareinsider.org