This economy is tough stuff for lots of small software vendors, but perhaps particularly those that are selling “improved productivity” or “enhanced collaboration” in the face of frozen IT budgets.  All is not doom and gloom however.  For example, Jive Software announced today that Q1 was its best quarter ever with 100% year-over-year revenue growth and its second quarter of being cash-flow positive.

Jive seems to be more the exception than the rule though as far as social software goes.  We know Mzinga has had two rounds of layoffs and a CEO change in recent months as it works towards profitability.  Similarly, Socialtext also had a small layoff and took additional funding — taking Socialtext’s total funding to about $18m.

What’s the difference between these vendors?  Some of it is technology certainly, but also a clarity of message.  I think Jive was early to market with what it is now calling “social business software” — in other words, a product that combines functions from multiple point tools (e.g., forums, wikis, social networking).   And Jive is playing in the big leagues versus large vendors selling enterprise deals for collaboration.  Selling deals for external, customer community sites also helps, as some of the external initiatives funded from marketing budgets are holding up better than large internal collab deals.

And from my perspective as an analyst in the content management realm, I also see a lot of WCM vendors coming out with more legit social software products – Day Software and EPiServer are two recent ones that come to mind.  How will these products fare as part of broader WCM suites?  Will they be the de facto choice for customers that use WCM products from these vendors?  Or has the market gone a different direction?  This is something I’ve blogged about before, but the social products from WCM vendors are getting stronger so the issue is becoming more real.

The noise in the enterprise social software market has certainly begun to die down and that is a good thing.  Looking forward to Enterprise 2.0 this year and the chance to hear more about what’s working and what’s not.