How App Marketplaces Are Changing Software and the World

Leave it to a comic strip, published 18 months ago, to allude to what has become a radical change in how technology is being adopted in the consumer world. Still, very few have recognized how this aspect would fundamentally transform enterprise software.

When an ecosystem includes a marketplace or “app store,” developers get direct access to customers, while customers get a more simplified method to find, try, buy, install and maintain software. The changes, which started in the mobile world, will transition to the enterprise and greatly change how we develop and acquire enterprise software.

Development and Innovation Open to the World

A marketplace allows developers anywhere to have direct access to all users of a specific platform, which in turn causes an exponential increase in the number of innovations available to enterprises. In the past we had platforms like application servers, which had an ecosystem of available applications. But a marketplace goes a generation beyond this concept by allowing small, medium and large software vendors equal access to the consumer.

Usually, enterprise software is purchased after contact with a software sales team or after a long and complex RFP process. Only large software vendors have the ability to fund a marketing and sales team large enough to gain access to these customers, and therefore relatively few applications are made available for enterprise platforms.

Apple’s App Store and the Android Market allowed independent developers worldwide to gain access to customers, without marketing or sales. The prospect of selling a US$1 application to over 1 million users caused an exponentially increasing wave of applications to be developed for those marketplaces.

Today, a developer in, say, the Republic of South Sudan can develop an application, post it to an app store, and make millions of dollars. Enabling developers worldwide exponentially increases the number of applications available to a platform, which in turn exponentially increases the number of innovations available to end users. This same boost in innovations is coming to the enterprise.

Simplified Download-and-Use Services

One of the key reasons for the success of the marketplace concept is how marketplaces allow a vastly simplified method of getting new applications. Users can more quickly find applications through online search. They can see facts, screenshots and customer ratings and reviews. Many times they can try-and-buy the application.

But the most radically different aspect is how applications are implemented.

With a marketplace, users should be able to install software by simply downloading the application into the platform with a simple click (note the comic again). No need for zip files, installers or terminal windows; just download and use. Updates should, additionally, be easy to acquire and install.It shouldn’t matter if the platform (upon which the marketplace apps are implemented) is installed into an internal network, is available within a private cloud, or is in a public cloud. A user should only need rights to add the application to the platform and an account from which to make purchases.

This simplification in how we can start up new services means more end users will be defining software services. Business groups will now primarily drive when and what software is purchased. This also means business will innovate more quickly, adding new services for their customers, partners and employees at a faster and faster rate in order to outshine their competitors. Those who implement software the old way will become less competitive and fail.

Purchasing Methods Are Changing

Purchasing from a marketplace will drive companies to decide on a set of strategic marketplaces. Enterprises will define a set of strategic platforms available as Software as a Service, on a public cloud, within a colocation facility, or within an internal infrastructure. Each will have an associated marketplace. These marketplaces will need to support these various deployment options (e.g., the company will need to ensure that if the HR department purchases a payroll application, they can easily select to deploy that application to the portal platform installed into their public cloud).

Corporations will increasingly look to develop corporate accounts with their strategic marketplace providers. These corporate accounts will allow the company to centrally track purchases from multiple marketplaces by multiple internal departments.This will also allow the company to ensure compliance and long-term ownership. However, complex governance polices implemented to manage these central contracts will reduce the innovations by the business units and will reduce the company’s overall competitiveness. In order to facilitate this balance, a company may decide to pre-purchase a select set of applications and make them available to business units through an internal marketplace. Business units would then select the apps they wish to deploy from this marketplace while the central group tracks usage and expenses.

It’s All Changing (Again)

All strategic platforms will need to support marketplaces, and both consumers and developers will need to decide which platforms benefit them the most. Their choices will often be based on one important aspect: marketplace momentum. Those marketplaces with the greatest number of innovations and the largest number of customers will be the ones that will be chosen.

There’s one last consumer benefit to mention, which marketplaces will facilitate, and that’s the change in enterprise software prices. Mobile marketplaces have already drastically reduced the prices of software (e.g., the average cost for desktop software was $50 or more, while the average cost for mobile software is now $1-$5). Much of this is due to competition, but it can also be attributed to the greatly expanded potential of sales (e.g., would you rather have 100 $10,000 sales or 1 million $5 sales?).

The vast increase in innovations and the drastically reduced price for software will have a profound impact on the software industry. The platforms of the future will be those who recognize this today.

Brian Kim is the chief operating officer for Liferay, an open source enterprise portal. Follow Liferay on Twitter.

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