How consumers are quietly driving billion-dollar valuations in the enterprise

From the Box IPO to Slack’s seemingly overnight billion dollar valuation, disruptive enterprise collaboration apps are one of the hottest tickets in tech right now, with analysts and pundits calling Box’s roaring NYSE debut a “validation of the space” and a “cause célèbre” for Silicon Valley.

There is a lot of speculation about the fundamentals behind the fast-rising valuations of startups in industries ranging from mobile payment technologies to taxi services. As with other categories, the same question applies to enterprise collaboration technologies: Are valuations justified by a structural, sustained shift in user behavior, or we in a reality distortion field?

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The trend lines suggest the former — that the need for powerful collaboration tools is accelerating. Ten years ago, everything was done in email. In the last five years, the workplace has seen an explosion in the number and type of tools that employees use to get their work done. What changed?

First, the context of our day-to-day work is shifting. Processes in every aspect of business from HR to marketing and healthcare are increasingly becoming digital and moving online. That shift is fueled by a business environment that rewards distributed global teams, faster development cycles, and agile supply chains. The resulting coordination costs are driving ballooning email volume. How many reply-all messages did you receive today?

That brings us to our second shift: Email and other corporate enterprise technologies have struggled to adapt to new work environments. In the era of centralized IT infrastructure, employees were forced to conform, but we now live in the era of the App Store. Empowered consumers can BYOA (bring your own application) to reshape IT and remain effective in a fast-evolving workplace. In a Google Consumer Survey where we asked workers using digital tools which types they were using:

• 84.6% said they’re using a document collaboration, instant message, meeting, mobile, or collaboration tool
• 46.7% said they use online document collaboration
• 37% said they use file sharing

Again, just five years ago, in an email-plus-locally-stored-files world, this survey would have looked very different. The explosion of cloud storage and collaboration allows employees to stitch together a “greatest hits” work tool box.

The third structural shift is the rise of smartphones at work. The availability of mobile, edge computing power reinforces the first two shifts. The depth of functionality and work that can be conducted via your thumbs is always growing, enabling businesses to operate at higher velocity. That same velocity creates obsolescence in legacy IT systems and underscores the need for new apps.

Of course, the ability for each employee to use their favorite tools also creates massive fragmentation and a different type of coordination cost. Think of a marketing content writer who works with several different teams and outside contractors, each using different file sharing, editing, and collaboration tools. To get her work done and synch her efforts with various teams, the writer has to navigate multiple different user interfaces, logins, and capabilities.

To manage these new coordination costs, we will see the rise of a “connective tissue” layer that allows for easy interoperability across cloud apps. But it’s not enough to just plug tools into one another; app integrations have to be carefully developed to mirror and support consumer behavior or users will abandon them. Companies like Wrike provide a cloud-based work collaboration platform that intuitively integrates with all the other business tools you use every day.

Welcome to the consumer-focused enterprise. In the era of the app store and bottom-up adoption, the customer is going to win. The companies that serve the consumer and help them perform better in the new realities of the workplace will continue to expand their marketshare and be a disruptive force in the enterprise.

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Indy Guha is a partner at Bain Capital Ventures and a founding member of the firm’s Bay Area office. He focuses his investment activity on enterprise SaaS companies across stages, with a special emphasis on marketing and sales technology.