I was recently the event chair of a panel discussion at the MIT/Stanford Venture Lab (www.vlab.org) entitled "Enterprise 2.0: a buzzword or a revolution in software development and delivery?" The event featured a panel of leading Silicon Valley CEOs such as John Roberts (SugarCRM), Ross Mayfield (SocialText), Antony Brydon (VisiblePath) and Ivan Koon (YouSendIt) and was moderated by Mary Coleman, a VC with Walden International.

The term Enterprise 2.0 has generated heated discussions recently. The concept was first introduced in an article written by AndrewMcafee - in an MIT Sloan Management Review article. The inclusion of the term and subsequent deletion from Wikipedia created a lot of controversy. More recently, some experts have been arguing the case for a broader definition of Enterprise 2.0 - an example can be found in this article.

The panel held different views on what the term Enterprise 2.0 means - no surprise considering that there is still no agreement on what is web 2.0, years after the term was first coined. However, the panel members strongly agreed that, in order for a company to be successful in today's environment, you have to break away with most established practices in software. In fact, when John Roberts was asked what he would have done differently, he stated: "I should have trusted my instincts rather than listen to so called experts who were telling how to get things done".

Antony Brydon - CEO of VisiblePath went further to state: "The fact that we are talking about Enterprise 2.0 is an admission that we screwed up in Enterprise 1.0". While the statement contains an element of hyperbole (I doubt that Microsoft, Oracle and SAP would agree that they screwed up in the 90s), this is a strong indication of the mindset of today's CEOs and the VCs behind them.

Why are those leading companies bent on breaking with traditional approaches to enterprise software? They simply want to avoid some of the problems that are plaguing "Enterprise 1.0" software companies: Very long sales cycles, customers' risk aversion, expensive sales and marketing etc… As importantly, the expectations of enterprise workers have fundamentally shifted: Software should work based on consumer experiences rather than enterprise experiences.

SugarCRM is probably the most extreme example of a company trying to break all traditional rules of enterprise software in all areas of the company: Development, Product management, Q&A, Marketing and Sales. John Roberts pointed to numerous benefits that the company is able to achieve as a result of his maverick approach: 1) continuous inflow of ideas from the community 2) Higher quality software 3) Higher ROI for customers 4) Lower cost of sales etc... Sugar CRM is the first enterprise application software provider which has transformed the dynamics of customers' interaction with the vendor, replacing sales and marketing with the technical staff as the first customer contact point. The result is substantial reduction in "explicit" sales and marketing costs, while expanding the role of the technical staff as "implicit" sales and marketing.

While Sugar is the most extreme example, all panelists pointed to how their companies, in their own ways, are breaking with traditional software practices: VisiblePath recently introduced a free enterprise edition of its capital relationship management. SocialText is introducing an open source version of its enterprise Wiki next year. Ivan Koon described how his company has grown rapidly because of the viral nature of its free email offering.

Through combination of free downloads, offering software as a service, and viral marketing, these companies have allowed their prospects to take control, reduce risk and adopt the solutions at their own pace. The model works and delivers value at substantially reduced frictional costs to both parties: it reduces the all-or-nothing adoption risk for the customer while reducing direct sales and marketing expenses for the vendor.

What is exactly enterprise 2.0? Still not sure. Perhaps more importantly not sure why it is all that relevant. What is clear however is that the realities of the enterprise are forcing software vendors to re-examine Enterprise 1.0 assumptions, and based on needs and new capabilities, how software is developed, tested, sold, delivered and marketed. And that should be relevant to most software companies.

Antony Awaida is the CEO of StartLeap, which helps businesses innovate in the areas of sales and marketing and jumpstart their sales. He can be reached at antony@startleap.com. This article was co-written by Robert Petrossian. He is an independent consultant and can be reached at robert_petrossian@yahoo.com.