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Long Term Web 2.0 Demand Up...Prices Down?

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Last week Forrester Research Group predicted a long term price drop for Web 2.0 service licenses. The report caused some speculation about why, when demand is expected to at least remain steady if grow slightly, the price of Web 2.0 services is predicted to fall. The report, compiled by G Oliver Young, expects a decline in the price of wikis, social networking and enterprise RSS feeds over the next five years. The cost to vendors, and savings to buyers, will be substantial -- approaching the fifty percent mark in many instances. According to Forrester, only mashups will continue to command their current premium.

Why such a steep price drop, in a sector that promises to cut expenses in a time of financial belt tightening? Because Web 2.0 has delivered results. The rush of big companies like IBM, Microsoft and Sap to incorporate Web applications into their software offerings is driving down the price of stand-alone products. How much better does a stand-alone wiki have to be to for a user to switch from their current vendor, who are now likely to have a similar offering at little or no extra charge? Coupled with the current financial situation, such questions may mean Web 2.0 is entering a period of consolidation, where duplicate offerings are weeded out.

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