Forrester Research analyst Oliver Young said in a recent report that as enterprise web service companies become more numerous and their offerings more similar, pricing will become the next area of competition.
"On the surface, times look good for vendors in the enterprise Web 2.0 productivity and collaboration space; more and more customers are interested in buying solutions, and those that are buying are doing so for larger and larger deployments," Young wrote.
"However, despite this momentum, the market footing is set to shift in fewer than two short years."
The analyst notes that enterprise users are commonly looking towards services that offer the functions of a hosted enterprise software suite, while simpler tools such as blog and wiki services are becoming cheaper and more widespread.
Additionally, larger vendors such as Microsoft and SAP are moving from software-only models into hosted services.
As a result, Young sees Web 2.0 vendors competing in a market that is more cramped with products that are harder to tell apart, driving much of the competition to price.
"Overall, Forrester expects that the price premiums that vendors have been able to command will disappear," said Young.
"Specifically, the amount an average enterprise pays for Web 2.0 tools will fall, despite growing numbers of licenses per customer."
The markets for traditional Web 2.0 products such as podcasting, RSS, blog, wiki, widget and social networking services are all predicted to fall, with only Mashups forecasted for growth.
As a result, Young advises companies to diversify and move beyond the common features into other business services. In the long term, the analyst says not to expect much more money out of Web 2.0.
Web 2.0 set for a fire sale, says analyst
By Shaun Nichols on Oct 11, 2008 7:33PM