Cambridge, Mass. — Despite a long-term future marked by commoditization, enterprise spending on Web 2.0 technologies will surge over the next five years, growing 43% each year to reach $4.6 billion globally by 2013, according to “Global Enterprise Web 2.0 Market Forecast: 2007 To 2013,” a new report by Forrester Research Inc. The five-year Forrester forecast includes a breakdown of future business spending on technologies such as social networking, RSS, blogs, wikis, mashups, podcasting and widgets, as well as an analysis of enterprise Web 2.0 spending across North America, Europe and Asia Pacific.

Forrester believes that Web 2.0 technologies represent a fundamentally new way to connect with customers and prospects, and harness the collaborative power of employees. Large enterprises such as General Motors, McDonald’s, Milwaukee-based Northwestern Mutual Life Insurance and San Francisco-based Wells Fargo have all made heavy use of these tools, and 56% of North American and European enterprises consider Web 2.0 to be a priority in 2008 according to a recent Forrester survey.

“Software firms can make money selling enterprise Web 2.0 software, but it will not be an easy road to hundred-million-dollar run rates,” said Forrester Research Analyst G. Oliver Young. “The market for enterprise Web 2.0 tools will be defined by commoditization, eroding prices and incorporation into enterprise collaboration software over the next five years. It will eventually disappear into the fabric of the enterprise, despite the major effects the technology will have on how businesses market their products and optimize their workforces.”

The key question for software firms is who pays for Web 2.0 in the enterprise? Three challenges face vendors: IT shops are wary of what they perceive as insecure, consumer-grade technology; ad-supported Web 2.0 tools on the consumer side have set “free” as a starting point; and Web 2.0 technologies enter a crowded space dominated by legacy software investments.

Currently, large businesses are spending more on employee collaboration tools than customer-facing Web 2.0 technologies, but Forrester expects that trend to reverse by next year. By 2013, investment in customer-facing Web 2.0 technology will dwarf spending on internal collaboration software by nearly $1 billion dollars.

Source: Forrester Research Inc.

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