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

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.

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.

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.

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. 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.