Social Software Consolidation – 2012 is just the beginning

By Jim Lundy

Everywhere you turn there are new Social Software vendors popping up. New VC funding is flowing, but for every new firm that appears, there others who are hurting. In 2012, we are entering a new era of Social Software Consolidation.

For example on May 1st, PeopleFluent made a “strategic investment in SocialText“. PeopleFluent is an HCM provider and the executives at PeopleFluent are also key principals at Bedford Funding. The purchase of SocialText by PeopleFluent is illustrative of the trend that is occurring. Many Social Software providers are struggling and there will be more consolidation over the next 18 months.

Social Software Vendors are For Sale

In my short stint back in industry, I did due diligence on over 25 software firms that were in collaboration and/or social software. Many are well known firms. Some were sold and the rest are still for sale today. Often it is because they burned through capital and didn’t establish a solid and repeatable revenue model.

As we have said in our premium research, the shift to Social is still in its infancy. VCs and hedge funds are just beginning to understand the value of social to legacy applications, such as HCM/Talent management. We expect to see more movement and consolidation in Social Software and as firms are bought, new firms will emerge.

If you are an enterprise evaluating Social Software, there are many things you have to take a close look at. Vendor viability is a critical one. We will be publishing our market evaluation of Enterprise Social Software vendors – the Aragon Globe for Enterprise Social Software later this month. We’ll be talking about some of the vendors who will be in our first Globe at our Webinar – Building the Social Enterprise on May 4th.

Social Software consolidation isn’t new, but we expect to see it accelerate in 2012 and 2013, as firms with capital realize they need to invest. As always, the adage of buyer beware applies to this category.