Highly Competitive - software industry insights

Internal Disruption – No Longer Business As Usual

Tapping into periodic business model renovation to refresh competitiveness

 

Not too long ago, a tweet from Hutch Carpenter @bhc3 caught my eye:

First step in disrupting an industry: identify the "business clichés"

The tweet linked to an article by Luke Williams, known for his work on ‘disruptive thinking’ for transforming businesses through seeking the unexpected and through adopting proactive disruptive behavior and strategies. The article elaborates on what is meant by business clichés:

In other words, what are the clichés - the widespread, hackneyed beliefs that govern the way people think about and do business in a particular space… inverting or denying industry clichés can often lead to significant business breakthroughs

Williams’ notions of ‘business clichés led to a couple of tweets from me that boil down to:

…apply internally to tech co’s biz model > question assumptions, status quo, disrupt business as usual…to move to new possibilities, competitiveness, new solutions & markets

As with the Social Business, starting internally with change frequently is a better route for companies when faced with the need to disrupt current business models for survival and success purposes. Software companies are especially prone to stand on old business models well past the expiration date. And many software companies are surprised when strong competitors emerge, based on fresh business models.

  

What is a Business Model?

Business models focus software companies on target markets, customers, the solution space and, somewhat indirectly, the competitive landscape, the same matrix that underpins market intelligence. When companies seriously embrace the selection of a business model, the process introduces good and rigorous strategic thinking into decisions about company direction, as well as definition of company scope. Through the business model, the focus is holistic and interactive in terms of how the company will proceed to achieve success.

Of course there are many definitions and concepts about what comprises a business model. A lot of MBA school, entrepreneurial, and VC hours have been spent on not only deciding what is the optimal business model for a particular undertaking but on the strategies to carry out its intentions.

  

The shortest definition that I’ve come across is in a post by Tim Berry: A business model is a description of how your business intends to operate and make money. Berry then goes to the next level:   

But innovative business models go beyond this simple formula to create customer loyalty, make value in unusual ways, and define new products or services that people didn’t know they needed.  

This dovetails somewhat with a business model definition put together by IBM:

• What value is delivered to customers: Customer segments, the value proposition, the specific “job to be done,” what is sold and how it is sold

• How revenue is generated: the pricing model and forms of monetization

• How the company positions itself in the industry: the company’s role and relationships across the value chain

• How the value is delivered: Key internal resources and processes as well as external partnerships.

There is lots of disagreement, lots of vague notions regarding whether business models matter or not.  Some consider the business model almost a sacred object, carved in stone. More and more, many see each iteration of the business model as disposable. A new class of thinking sees the business model not as an end but an ever-evolving means to success as a company.

 

Articulating New Direction - Most Companies Not Very Good At Doing This

Intriguing idea: the disposable business model. But how many companies pull off such an approach?

From my experience in the software industry, not many. Particularly bad at changing direction are mid-sized software vendors that are publicly traded. While being a smaller company would suggest agility for change, often these companies are ham-strung by boards of directors who seem to want growth without risk. There is no growth without risk for most companies. One piece of advice to mid-sized software vendors is to never go public and thus retain a healthy ability to reinvent the company without the inertia of boards of directors and Wall Street expectations. Another piece of advice: learn to embrace risk: that is, the good kind that can lead to growth and new success.

But no matter the size of the company, many software vendors usually wait too long before assessing the health of the current business model and even then, are slow to articulate change, even slower to act effectively. As a result, core markets increasingly stagnate, management still tries to work with the old way of doing things, and fails to work genuinely on a new business model, or as Williams advises, to identify and then deny the business clichés that are dragging down the company.

In 2008 Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann published the article “Reinventing Your Business Model” in the Harvard Business Review, an article that went on to receive second-place honors for the 2008 McKinsey Award. The article culminates research into the difficulties many companies have with pulling off success through business model innovation. The authors contend that these companies have such poor understanding of the current business model (really disturbing! but explains a lot…) that they can’t relate the current model to new opportunities, nor can they be confident about ejecting the current model for something new.

(Clay Christensen) also underscores the fatal flaw that managers make when trying to reinvent their business in the face of a disruptive competitor. Their solution is often to leverage what the company already has in place at marginal cost rather build an entirely new business model with heavy investment.

If you are trying to create a new business model because the world is changing, then you don’t want to leverage what is already in place. An entrant doesn’t have anything to leverage, so just creates what needs to be created.

 

When It’s Time For Reinvention

A 2005 survey by the Economist Intelligence Unit reported that over 50% of executives believe business model innovation will become even more important for success than product or service innovation. A 2008 IBM survey of corporate CEOs echoed these results. Nearly all of the CEOs polled reported the need to adapt their business models; more than two-thirds said that extensive changes were required. And in these tough economic times, some CEOs are already looking to business model innovation to address permanent shifts in their market landscapes.

 

Insanity: doing the same thing over and over and expecting different results 

-- Albert Einstein

  

Of course, there’s no point to changing the business model if the company isn’t innovating its software offerings, which must come about by “disrupting business as usual” internal to the company. Not all product innovation demands a reinvention of the business model. Perhaps the salient question is: how does this new innovation impact the proposition articulated for customer value? Companies that find success with business model reinvention also possess clear understanding of their customers and the value to those customers that comes from innovations.

Identify When A New Model May Be Needed:

An opportunity to...           

• Address needs of large groups who find existing solutions too expensive or complicated
• Capitalize on new technology, or leverage existing technologies in new markets
• Bring a job-to-be-done focus where it doesn’t exist

 A need to . . .

• Fend off low-end disruptors.
• Respond to shifts in competition

 

To determine whether a firm should seek to reinvent its business model, Johnson, Christensen and Kagermann advise these steps:

• Articulate what makes your existing model successful. For example, what customer problem does it solve? How does it make money for your firm?
• Watch for signals that your model needs changing, such as tough new competitors on the horizon.
• Decide whether reinventing your model is worth the effort. The answer is yes only if the new model changes the industry or market. 

So the new proposition for staying competitive may be that many companies will need to adopt the strategy of continuous business model reinvention. But to do this, tremendous internal change will have to happen, particularly around the management of the company. Reinvention, new directions, continuous competitiveness -- all are only possible in companies that embrace change and innovation in the corporate cultural DNA.

 

             
                              Source: IBM CEO study – Capitalizing on Complexity

 

Comprehensive Market Intelligence is Key to Business Model Disruption

A lot of what can make a software company more competitive – and can contribute to innovation of business models, markets and products – comes from well-executed Market Intelligence activities and processes. Excellent Market Intelligence is essential if business model reinvention will be an on-going initiative. Understanding customers, markets, channels and competitors is based on better information to create advantage in new and unique ways:

• New opportunities – identify new trends that will matter to target markets and customers; how to get there before the competition (whenever possible)
• Early warning of industry, market and/or competitor changes – take advantage of opportunities and leverage/deal with threats and risk, and always look over your shoulder…
• Enhanced customer interaction – understand customer POV, goals, needs, strategic direction
• Stronger target market selection & positioning – research, validate go-to-market and positioning; locate under-served markets for target customers and solution space; guide how to articulate positioning well for customers, analysts, industry
• Strategic view of competitive landscape – figure out true differentiation, figure out where competitors are not operating; understand the issues that matter to customers and the solutions they seek from competitors

 

 

Reinvention: Brand Equity / Brand Perception

I want to open up the question of how business model reinvention impacts Brand, both in terms of brand equity (value and general recognition built from the former business model) and brand perception (how current and potential customers – plus media, competitors, analysts, etc. – view the company). In the not-so-distant past, it had been considered near suicide to make business model changes that could negatively impact Brand. But in the digital age, when information is quickly disseminated through endless media, most people are easily educated about changes in a company. The Internet itself is all about constant change, and many have grown up in that environment.

I’m not going to explore the Brand aspect in this article but it is an issue that must be considered when reinventing business models and enacting innovation that impacts customer perception and receptivity to the company’s offerings.

  

Smaller Companies With Disruptive Genes – Better At Business Model Reinvention?

>> JackBe – Customer-Driven Disruption

JackBe started off as an Ajax tools vendor in 2001. After a while the company began targeting enterprises with a mashup platform that connects to all sorts of data sources. Responding to what JackBe customers wanted, the next development was to provide capabilities for ad hoc data integration mashups by end users.

Recently JackBe has been calling itself ‘the Real-Time Intelligence Company’, specializing in situational awareness, and is promoting the idea that the company may have a new way to provide business intelligence for enterprise end users. Real-Time intelligence for JackBe first of all means self-service BI, extrapolating its mashup services for end users. Real-Time also means fast, easy access to existing data sources, without concern about the freshness of the data. Essentially, the JackBe approach supports instant decision-making in certain scenarios.

A significant challenge entails the validation of data sources and value of the resulting mash-ups: do the end users understand what they are doing and are they intelligently combining the appropriate data? Is the intelligence that is pulled together relevant and accurate, and how do end users know or test the intelligence to provide validation?

By stepping into the larger arena of BI, JackBe now has invited in scrutiny from a well-established solution space. However, traditional BI is not without its problems and has suffered low adoption and success rates over time. It may be that JackBe is pioneering a new approach that could make a significant change to how BI is practiced or even what constitutes “business intelligence”.

JackBe has found itself moving into a new business model, seemingly a case where business model reinvention continues to be customer-driven, and where a company listens well to its customers and acts on their needs and wishes, to achieve competitive positioning and success. But with the new business model comes new challenges to ensure the validity and accuracy of its product directions.

  

>> NewsGator – One Business Model Dies Out, Another Adopted to Thrive

Starting in 2003, Newsgator focused on developing RSS usage for information and content consumption.  A business model shift occurred when NewsGator changed from a consumer focus to targeting enterprises. Even though NewsGator still provides RSS, access is now free.

In 2007, NewsGator reinvented its business model by launching Social Sites, community / collaboration software that also provides tight integration with Microsoft SharePoint. NewsGator was already a SharePoint partner for its RSS capabilities, so its business model shift pivoted on a strategic, and rather significant, partnership already in place. NewsGator acquired Tomoye community software in 2010, mainly to enter new markets. Tomoye also had the SharePoint connection.

The move to a communities / collaboration platform that extends SharePoint has proven to be successful to date. The new business model includes a deep commitment to Microsoft and SharePoint – and active cultivation of an ecosystem of Microsoft partners around “making SharePoint social”. Social Sites is built directly on the SharePoint platform, is SharePoint cloud certified, supports multiple versions of SharePoint, including mobile and Office 365.

NewsGator has selected a niche for its social solutions in that it is dedicated to complementing the SharePoint platform and to making the experience of using Social Sites with SharePoint a seamless and smooth experience for end users. With this business model, NewsGator success is highly dependent on continued SharePoint success. The up side is that Microsoft makes available an extensive ecosystem that can greatly benefit NewsGator.

One aspect of business model reinvention for NewsGator tracks back to the impact of reinvention on Brand. Does the company name still make sense, shifting from RSS/aggregation services to social media platform? Or does the brand recognition of NewsGator’s name trump any confusion about what the company now does? Frankly, considering that a good many software company names are obscure, this really shouldn’t be an obstacle for NewsGator, particularly with such a targeted solution in conjunction with SharePoint.

  

>> Stone Bond – From Services to Software Vendor

There are many cases where professional services providers for IT solutions will either productize services work into a software offering or purposefully create new software solutions that eventually evolve into a packaged software business for the services company. A key change in business model comes when the company must decide if it is to be a dedicated software vendor or a services company – or even, perhaps, the company decides to split into two organizations.

Stone Bond’s consulting services began in 1993, providing IT solutions for the worldwide oil and gas industry. Among the services was data modeling projects, working with oil company engineers as end users. Many in the oil and gas industry have long understood that their data is a very valuable asset.

In 2002 Stone Bond Technologies launched a software solution called Enterprise Enabler for data and business integration projects. Enterprise Enabler presents as a single environment for EAI and ETL capabilities and is somewhat geared towards end users / business users through out-of-the-box “codeless” data integration capabilities. Stone Bond has developed several technologies such as AppComs (for connectivity) to innovate how integration projects are created and executed. BPM and workflow based on SOA utilize end-to-end shared metadata.

While Stone Bond still targets the oil and gas industry, and obviously has a great deal of expertise for that industry, the company has already taken Enterprise Enabler into other markets, such as financial services and government. The solution also straddles target customers by offering a solution that can appeal to business users and/or IT teams. Enterprise Enabler may be blazing a trail for bringing together IT and business to better execute data integration projects as collaborative partners.

The company is now working on showcasing Enterprise Enabler as a software product independent of the original consulting business, with work going into raising brand awareness. Enterprise Enabler already has a solid customer base, but also seems like a “best-kept secret” in the data integration vendor space. In some ways, Stone Bond has an interesting clean slate when it comes to marketing to and educating the world on what this solution has to offer.

 

Related Links

Market Intelligence – Making Better Business Decisions at the Core of the Company

Software companies still fail to tap into top benefits from market and competitive intelligence programs

Provocation-based Market Intelligence in a Market-Driven world

Shallow Thinking Ensures Bad Business Decisions

B2B WEM / WCM Software Vendors Targeting Mid-Market customers: stay where you are!  

 

About the author: Julie Hunt is an accomplished software industry analyst, providing strategic market and competitive insights. Her 20+ years as a software professional range from the very technical side to customer-centric work in solutions consulting, sales and marketing.  Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt   For more information: Julie Hunt Consulting – Strategic Product & Market Intelligence Services

 

Disclaimer: Julie Hunt is not affiliated with any of the vendors in this article.

 

B2B WEM/WCM Software Vendors Targeting Mid-Market customers: stay where you are!

 

Here’s a piece of advice that very few B2B software vendors of any sort ever follow: 

Vendors: If you have been targeting Mid-Market customers – then stay where you are!

Ignore the siren song of the high-end Enterprise.

 

This advice is especially meaningful for B2B vendors for Web Content Management (WCM) and Web Engagement Management (WEM).

 

From my experience, many of the WCM / WEM / CMS vendors seem to do very little market intelligence research and analysis to understand what exactly they are selling and to which customers/markets. Most WCM/WEM/CMS vendors seem to be milling around with no clear indication of how each vendor aligns to clearly defined solution, customer and market segments within a go-to-market matrix.  The main focus of most of these vendors is on feature sets, and not on delivering authentic solutions for specific industry scenarios and business problems.  When any sort of Mid-Market B2B software vendor persists with very horizontal solutions, it is in danger of “disappearing”.

 

The mid to upper tiers of the Mid-Market provide a fertile market for B2B vendors who are themselves SMB or Mid-Market companies. For the mid to upper tiers of the Mid-Market, annual revenue runs from $250M to just under $1B. Vendors will do better if they segregate this range into two segments ($250M-$499M and $500M-$999M respectively).  Within those two segments, vendors should then select and learn a lot about specific customers and various solution scenarios that matter to those customers.

 

I’m specifically calling out Mid-Market customers for WEM (rather than “classic SMB”), due to the higher cost of implementing digital marketing solutions based on WEM platforms, which are likely out of reach for classic SMB companies. Once a vendor is committed to targeting Mid-Market companies, the next phase is to very specifically target segments of customers for mid-market offerings. 

 

 

Drifting into the High-End Enterprise Usually Ends Badly for Smaller Vendors

I’ve seen too many SMB / Mid-Market software vendors lured by potential big money and big deals in the high-end enterprise; after taking the plunge, very few of these vendors do well or even survive. It is near-to-impossible for smaller software vendors to compete against large vendors when providing high-end solutions. When trying to compete with the “big boys”, sales engagements frequently deteriorate into pricing wars that can destroy the well-being and income of the smaller vendor. After crossing over, the smaller vendor spends all the time on “me too” development for what the high-end vendors are already doing. The smaller vendor becomes snarled up in feature bloat that leads to the bastardization of its original offering. And worse, the smaller vendor ends up alienating its original target markets of mid-market companies and loses their business.

 

The high-end enterprise is a very tough place for smaller software vendors: there is a much smaller field of potential customers, fierce competition for those customers, plus larger software vendors already have established extensive relationships in these enterprises. Large enterprise customers are also harder to please, bring on longer sales cycles that include more chances to fail. Even when a smaller vendor wins an initial deal with a large enterprise company, it is usually displaced by a larger vendor very quickly.

 

Conversely, when targeting the Mid-Market, very few high-end vendors go very deep into this overall segment (and rarely into SMB). For the most part, large enterprise software vendors still don’t really know how to win Mid-Market business or provide the right-fit solutions. And it’s not just about price but about understanding how Mid-Market buys software solutions . On the other hand, a Mid-Market vendor already has decent affinity for some of the concerns of its potential Mid-Market customers, simply by reflecting on what matters to the vendor’s own success.

 

 

Vendor-performed Segmentation Is Essential to Build WEM/WCM Solutions for Mid-Market

Mid-Market (and SMB) customers are overwhelmed by the large number of CMS offerings of all kinds and are not well prepared to figure out which ones are appropriate for WEM or even just WCM. WEM vendors targeting the Mid-Market have to do a much better job of marketing and engaging specific segments.

 

Vendors must take action to properly position themselves in segmentation to differentiate their solutions form the mass of WCM/WEM offerings. They must put focused thought and time into identifying and understanding specific customer segments in the Mid-Market. Then vendors must undertake further understanding of what the vendor solutions need to provide the best support for target customers. Vendors need to be clear on what the solutions are not, to avoid “market sprawl”. It will make a huge difference if vendors put good time into a conscious and rigorous go-to-market strategy that is continually fine-tuned. 

 

Take time to properly segment target customers and markets for solutions:

· Know the target customer size – usually based on revenue ranges

· Identify who should use your solution and why – what problem(s) does it address (be very specific) – stay far away from the massive horizontal pack of “CMS” offerings

· Research and select one or two industries you’d like to work with; then select a segment in the industry that is a good bet for WCM/WEM solutions

· Analyze and build out specific industry scenario solutions that really work – again focus on real target customers and real customer problems/needs

· Keep in touch with the customers who are using the scenario solutions: fine-tune, improve, evolve into other focused solutions

· Assess the success of the above to make decisions about new go-to-market strategies that will add growth to the company

· Truly support customers throughout the lifecycle of the customer experience

 

 

No Illusions – Price is #1 Criterion for Selling to Mid-Market

I’m just calling this out plain and simple:  for most Mid-Market customers, price is the first requirement to be met by prospective vendors. Most Mid-Market companies have very clear parameters for what they are willing to spend on software. But the Mid-Market also wants value for price. When I say price, I mean the total cost of the end-to-end solution that will be up and running and working properly – so price includes money, time and people.

 

Many Mid-Market companies have small IT groups, so the following capabilities are essential: ease of implementation, low maintenance, ease of use for non-techies, good to great performance, delivery on vendor promises. When selling to Mid-Market companies, publish honest prices on your corporate website. Revealing pricing is a part of marketing to and engaging the customer-as-buyer when dealing with the mid-market. Remember: Mid-market companies have no time or patience for long sales cycles and complicated pricing schemes.

 

 

Strategy for Providing and Selling WEM to Mid-Market Companies: keep it simple

Vendors must take the time to research, analyze and understand what comprises a WEM solution for target mid-market companies. They have to take a look at the overall WEM capabilities of their solutions, and then reconcile which capabilities matter to their Mid-Market target segments. CMSWire has had a recent series on WEM solutions that is a good starting point to help vendors with mapping a solution to the needs and requirements of desired customers.

 

Where WEM is heading for the Mid-Market:

· Product/solution capabilities that meet Mid-Market requirements

· Capabilities that support marketing strategies of most Mid-Market companies

· Inclusion of social media capabilities and/or integrations with social media and Social CRM apps

· Monitoring trends related to desires/needs of target markets and specific industry scenarios (identifying what Mid-Market segments need, not what big enterprise companies need)

· But continue to monitor Enterprise trends to watch for trickle-down effects – this is where vendor smarts and market intelligence must come into play

 

 

Innovate With Real Solutions for Real Markets

Smaller vendors for Mid-Market WEM solutions are frequently more agile (carrying less legacy and expensive baggage) when it comes to pursuing innovation that will benefit target customers. These vendors are better positioned to move quickly to embrace future trends that define where solution markets are heading.

 

Vendor success comes from continuous innovation that makes sense for its Mid-Market customers:

· Engage in continuous market intelligence processes to monitor target markets / customers, and what they want for future success – many sources for this information

· Innovate specifically for Mid-Market target customers – perform excellent research/analysis to understand which are the best markets/customers/solution scenarios

· Conduct continuous conversations with current customers, and with companies wanted as new customers – embrace Social CRM practices for better conversations, listening

· Keep an eye on what the marketing teams of Mid-Market companies’ will need from WEM solutions

· Monitor enterprise-level trends for WEM to determine if the trends are meaningful for Mid-Market companies; also follow WEM trends for consumer marketing for new ideas – but choose wisely for real market strengths

· Don’t follow in the footsteps of big WEM solutions just to land where they are now

o    Jump ahead to new trends that make sense for target Mid-Market segments

o    Pick innovation that is right for target customers and for the vendor: real differentiation will result

 

 

Jeremiah Owyang on Future of the Corporate Website

Recently at the Gilbane Conference 2010 in San Francisco, and on his blog, Jeremiah Owyang has set out some compelling predictions for the evolution of company websites and the potential new world of distributed web presence. He sees social sites driving far more customer connections and brand awareness than the traditional corporate website of past years.  This is the sort of innovative thinking that vendors for Mid-Market WEM/WCM solutions should be monitoring. 

 

 

A couple of Jeremiah’s slides from Gilbane Conference 2010 San Francisco:

 

http://www.web-strategist.com/blog/2010/05/19/slides-roadmap-for-integration-of-social-into-your-corporate-website/

 

 

 

 

 

 

 

 

 

 

Related Posts:

Goodbye Corporate Website – Hello Web Presence Management Framework?

 

SMB / Mid-Market B2B Software vendors - Findability + web presence + social: attracting the “customer as buyer”

 

B2B Social CRM for Software Vendors and the Lifecycle of Customer Experience

 

Moving beyond WCM - Web Experience Management software solutions and markets

 

Selling Software Solutions to SMB Markets – Who and How To Target

 

 

 

 

About the author: Julie Hunt is an accomplished market intelligence analyst, providing strategic market and competitive insights for the software industry. Her 20+ years as a software professional range from the very technical side  to customer-centric work in solutions consulting, sales and marketing.  Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt   For more information: Julie Hunt Consulting – Market & Competitive Intelligence Services

 

 

Disclosure:  From time to time, I contribute articles to CMSWire.

 

 

Levels of Social – and Integration – Cut Across Enterprises

When I started writing articles for my blog Highly Competitive, I had in the back of my mind the “classic” advice for professional blogging: pick one main area to cover and as such, show my SME-ness for that area. So I should have selected a particular software solution space and stuck to it.

 

Well that doesn’t really work for me and isn’t even realistic for anyone analyzing today’s software infrastructures in most companies. As such, I find myself covering multiple software topics, largely due to my diverse software tech background, and it all makes sense as we see more and more overt overlap and interconnection between the different applications of any-size enterprises, and between the activities and processes of how enterprises do business. As enterprises become more customer-focused (outside-in), what has become especially interesting is the evolution of change that eventually will produce Social businesses.

 

Starting with systems infrastructure, many enterprises have multiple points of integration and interoperability. It is this interrelatedness of systems that increases the business value to the enterprise. Integrations and interconnections are happening at multiple levels in businesses: their IT/application infrastructures, the applications themselves, how teams function in the enterprise interacting with systems and people, and how companies are evolving for doing business and engaging buyers. To become an effective Social Business, enterprises will have to nurture integrated internal systems and processes, as well as social strategies and practices for external and internal collaboration and communication.

 

 

 

 

 

 

Enterprises Can’t be Built on Silos – First, a Look at Internal Interoperability

It has become more and more clear that enterprises work better with overtly interconnected systems and business processes. Silos within enterprises both for systems and internal processes have caused a lot of problems. Enterprises, no matter the size, cannot have teams, or systems, operating in vacuums. Where too many silos persist, businesses are doomed, whether the silos are technology or human based.

 

Understanding how to reduce duplication in systems infrastructure, business processes, team activities, and strategy implementation does much to improve the health of the enterprise. Enterprises want to achieve efficiencies of operation and want to do more with fewer resources, so the elimination of duplications in systems and teams, and the increase of integration (systems) and collaboration (people) is essential.

 

Since we’re talking about the integrated enterprise, I see enterprise data integration as an illustrative “metaphor”. In most cases data integration endeavors to cut through almost everything in systems infrastructure and involves multiple teams, both IT and Business. Building really good DI processes requires the involvement and collaboration of many teams. Data integration solutions cannot be built in a vacuum to be effective; DI initiatives embody a metaphoric sense of interrelationships and interoperability: process, collaboration, disparate data feeds (information sources) coming together, business rules, business needs. People, business process and technology have worked together to achieve the right results. 

 

 

Social Capabilities and Strategies Appearing in Many Enterprise Software Solutions

Increasingly, enterprises are introducing and integrating social media for internal and external applications.  And now many “traditional” enterprise solutions are adding / integrating social capabilities, to enhance the usability and relevance of these solutions.

 

Business cases for social media include: internal implementations for enhanced collaboration and communication purposes for employees; external initiatives for better engagement and support of customers/buyers. Many social media guidelines rightly advise that introducing social practices and technology into an enterprise should come after a thorough understanding of what is to be accomplished, and then after an articulation of the strategy. Additionally, businesses have to figure out what cultural changes need to take place internally, for social to make a big difference. Business social process is something that people have to do authentically. Technology and tools do matter as a means of enacting and managing social business processes, but they are no substitute for strategic planning, best practices, real goals, and serious consideration for the human participants.

 

Beyond the social media technology that is being adopted by enterprises, many “traditional” enterprise applications are becoming more “social”. This is reasonable considering that software solutions are for use by people, whether employees, customers/buyers, or partners. Most software solutions are components of people-oriented processes. These “socializing” solutions include: BPM, BI, CRM, ERP, internal collaboration / intranet, and content management.

 

Recently Forrester’s Connie Moore - @cmooreforrester - commented on Twitter: “social computing has become the tipping point for businesses and vendors finally marrying collaboration and process” and then “Collaboration between business and business and business and IT is core to any successful #bpm effort.” Connie Moore has extended her coverage of BPM to include social capabilities that will transform BPM solutions.

 

For many software industry analysts and writers, there are no longer clear demarcations between software solution spaces.  The “classic” approach of separate software solution categories being covered by SME writers is giving way to analysis that acknowledges the interdependencies of different kinds of software solutions.  We are seeing more collaborative work across solutions, with social computing as a common thread of discussion.  Analyst firms like Altimeter Group and Forrester are working with more collaborative efforts from their staff analysts across formerly separate software solution spaces to reflect the realities of how enterprises operate.

 

 

And People Complete the Integrated Social Business

My tech background has a markedly strong emphasis on people since software companies are very people-intensive enterprises.  Many teams need to collaborate to accomplish company goals and customer needs, with the result that most teams are customer-oriented. If you have a career in software technology, it is essential to recognize the value of people, especially customers. Not surprisingly, many customers of software technology are driving the change to Social Business where the focus is more on people and less on tech.

 

It’s not just about why people buy or make technology decisions but about respecting people who are trying to accomplish business tasks and solve real problems, and who just want their software to work as advertised without a lot of pain to get there. Software technology ultimately is a product to be sold, so the focus must be on the purpose and real value the technology provides customers.  

 

On the software vendor side, people collaboration should be a top priority: collaborations to sell solutions, collaborations to contribute to customer/buyer success, collaboration with partners and customers for success. Businesses can be very successful if they encourage and engender internal cross-team collaborations focused on customer needs. The growing interest in Social CRM addresses how businesses develop customer relationships to contribute to customer success.

 

Social is partly about tapping into the connectedness that people are building with the web as a platform.  Social Business adoption by software vendors must be based on the fact that people and relationships are what really drive success and longevity. The lesson to enterprise management: Social media adoption has been driven by the people who want to use it to communicate and work efficiently, no matter the purpose.  Social media invaded enterprises because people really want to use it – because it is effective for what they are tasked to accomplish. 

 

 

“Social Business” practices have been around for years  

The essentials of Social Business have been around for years in many software enterprises – frequently as a “shadow” culture. A lot of employees in the software industry have intuitively understood and practiced aspects of the “social business”, recognizing the importance of the customer and of collaboration.  The process of selling software solutions to enterprises involves a lot of people working with many other people, for internal and external purposes, no matter the sales model.

 

Ironically employees, customers, partners have been open to adopting social capabilities as part of doing business; the executive level, however, is the laggard for authentic adoption of social collaboration culture and processes. Upper management often has impeded real efforts for social business and has also contributed to creating silos within the company and chasms between teams. Many software companies have been poorly structured for many years to be able to nurture “social business”. Usually not enough people and not enough budget have been allocated for fully supporting strong customer-centric processes and initiatives. 

 

It’s very important that executive and other management levels formalize strategies for Social Business and better empower the many employees who already intuitively know how to find and keep customers/buyers through social relationships and support for customer success.

 

Fully empowered collaboration with customers and partners will improve sales, product offerings, long-lasting relationships, and will lead to fewer problems. Enterprise teams will be better connected to customers, and to one another. And upper management may finally get real perspective on employee motivations as well as customer desires.

 

 

 

Profile of a Software Aficionado

Indeed, my software technology background contributes to my SME “schizophrenia”: Extensive stints as enterprise and small business developer, SE, solutions consultant, market and competitive intelligence analyst. Plus time served in multiple software spaces:

· developer and systems analyst for materials management systems in semiconductor manufacturing; also small business software solutions developer

· very deep dive in data integration solutions, for many years

· whirlwind couple of years providing strategic analysis for WCM/web experience management, social collaboration, presentation portal, web 2.0 apps, and transactional content management

· continuous auditing and analysis of SaaS, OSS, cloud computing, Agile -- impacts on software industry and on vendor business goals

 

 

 

  

Related articles:

 

Social collaboration in enterprise:The heart–and goal–of Community is “collaborating people”, not collaboration tools

 

B2B Social CRM for Software Vendors and the Lifecycle of Customer Experience

 

The incongruous worlds of “data integration” – Making data accessible for any-size companies

 

 

 

 

About the author: Julie Hunt is an accomplished market intelligence analyst, providing strategic market and competitive insights for the software industry. Her 20+ years as a software professional range from the very technical side  to customer-centric work in solutions consulting, sales and marketing.  Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt   For more information: Julie Hunt Consulting – Market & Competitive Intelligence Services  

 

 

SMB / Mid-Market B2B Software vendors - Findability + web presence + social: attracting the “customer as buyer”

 

For anyone selling software solutions, a strong and well-crafted web presence is de rigueur for connecting with potential customers or with the “customer as Buyer”. More and more purchasing of various software solutions is becoming an online event, fueled by the growing success of SaaS, cloud, and open source options. SMB / Mid-Market buyers, who don’t have a lot of time for purchase cycles, want to do business with vendors who make it much easier to reach a decision.

 

 

According to Forrester’s Megan Burns, Web Sites That Don't Support Customers' Goals Waste Millions:

 

“Results show that the vast majority of people switch to more expensive channels…Others give up and go to a competitor, while still others abandon their goals entirely. …for an average retailer the result is millions of dollars in lost revenue and unnecessary costs. Firms should use the data and models in this report to understand their own exposure to these failures and make a strong case for fixing usability problems that drive consumers away from the site.”

    (Forrester 2010)

 

While the Forrester study focuses on online retail, the implications are highly relevant to software vendors targeting SMB and Mid-Market companies, since these B2B buyers primarily use the internet as the gateway to software purchases.  These buyers also encounter similar difficulties trying to navigate software vendor websites to find relevant content and support to help them make buying decisions.  

 

With buyers focused on the web as a purchasing gateway, B2B software vendors are no longer the sole owners of influencing brand perception – many online venues now play significant roles for influencing buyers, and many of these online venues are not controlled by the vendor.  However, the vendor still has control of providing a high quality web presence through its corporate website and the power to increase findability for the right “customers as buyers”.  While buyers reference other influencer sites, software vendors can contribute greatly to attracting and persuading buyers if buyers can easily find well-crafted and useful content on the vendor website. 

 

Vendors should exercise all necessary resources to exceed the buyer expectations and needs when visiting the vendor website. Not being highly findable as a web presence for the right buyer content will put into motion the potential for buyers to turn to other sites, many of which lead to competitors.

 

 

Website Findablity, Usability, User Experience – They Really Matter

If buyers can’t find, via the internet, what a vendor has to offer, then the vendor is plain old losing real prospects and sales every day.  Findability addresses the importance of websites being quickly found, easily accessed and distinctly identifiable with the B2B software vendor’s offerings.  With the mercurial nature of the internet and individual vendor web presence, findability requires constant attention and fine-tuning.

 

Unfortunately many B2B software vendor websites are built from the vendor’s perspective to support its own processes for marketing and sales – instead of from the perspective of the “customer as buyer”.  And most of these vendor websites have failed to provide easy access to high quality content that helps buyers make purchase decisions about the vendor offerings. B2B software vendors have a great opportunity to establish a more integrated and interactive web presence that pulls together people, tools, services and content.

 

There are lots of methods and tools to increase website findability: SEO optimization, recommendations / social search, Google marketing offerings, Web Standards, and so on.  But the right kind of content, including social media, is key to attracting and keeping buyers on the software vendor website because these buyers have a list of items (and expectations) deemed necessary for deciding if the vendor’s software solutions are what they need.  As the quality and diversity of content on the vendor website increases, so does the findability – as well as potential buyer interest.

 

Social media venues (communities, forums, blogs, wikis, Twitter, Facebook, etc.), both on the vendor’s website and other well-visited sites, can be used with dual purpose:  first to provide quality content, user interaction, and collaboration experiences that draw buyers to the vendor; and then, to provide dynamic research sources for better understanding the SMB / Mid-Market buyers that the vendor is targeting. Ongoing vendor participation should take place on the vendor’s social sites and on external social sites that are strategic to connecting with target customers.

 

This post from Jeremiah Owyang (Altimeter Group) provides timely insight into creating a buyer/customer-centric web presence that integrates with social media and why this matters. There are two very useful charts: one covers feature/benefits of integrating social networking sites, and the other details the integrations available from popular social networking sites.

Roadmap: Make Your Corporate Websites Relevant: Integrate Social Network Features

 

 

OK – Buyers have found the software vendor’s website…  

Now -- are there content and user experience worth finding? – How easily can buyers tap into what the website offers?  Buyers come to a software vendor’s website with expectations. Creating and structuring the website from the usability perspective of the buyer (or buyers if targeting multiple buyer types) will greatly support ease of finding relevant content and will generate positive user experiences.

 

SMB / Mid-Market buyers of B2B software generally want a wide variety of information about the products and solutions, input from communities and forums, clear pricing, and other information that will guide them to making a buying decision.  They would like this content in easy-to-download formats - without having to answer lots of questions to enable the download. There is an increasing buyer sentiment that vendor websites should not require any information from the buyer for any content downloads.  After all, the sales engagement is buyer-driven, with the buyer deciding when and if next steps will be taken.

 

 

Content Sought Out by Software Solution Buyers

Anything provided on the vendor website should be authentic, high quality content that answers real buyer questions. “Real” content engages buyers, so invest in subject matter experts who can write relevant, sharp and interesting documents, articles and posts. Vendors should provide links to industry writers, influencer blogs and communities, and to analysts who contribute insight regarding the vendor’s solution space and the competitive landscape. When significant negative content is published about the vendor, it’s smart to deal with it head-on through a vendor blog, as well as through any external social sites that are relevant – be honest and focused, always responding with the buyer’s POV in mind.

 

Content that buyers would like to see on the vendor website:

 

à  Products and solutions information

· White papers providing orientations for both technical and business problems

· Product and solution datasheets  

· Technical specifications

· Best practices / company approach to solving problems with the vendor solutions (lots of details)

· Case studies with real meat

 

à  Social media

Incorporating social media in the vendor website further provides the opportunity to create a more personalized customer experience. The website should provide vendor-sponsored social media sites and links to external social sites. Buyer-friendly social media include: communities, blogs, wikis, forums, RSS, self-serve webcasts and podcasts, video sharing sites, social networking sites. As with findability and usability, social media requires real commitment, constant nurturing and responsiveness to anyone participating in the vendor’s social sites. Social media offers a fantastic venue for building relationships with “customers as buyers”, for collaborating with them on the future direction of the vendor’s offerings, and to respond quickly to questions and issues.   

 

à  External Content from Influencers – which include current customers

· Communities, forums, blogs – the ones external to vendor website

· Coverage, reviews by industry writers and influencer blogs

· Analyst coverage – especially from analysts that specialize in software for SMB / Mid-Market

 

à  Pricing

For SMB / Mid-Market buyers, pricing should be published on the website, should be straight-forward, and always up-to-date.  These buyers are not interested in drawn out sales cycles – they will simply move on to another vendor if the clock has been ticking too long.  Many buyers would like to make most software purchases via the website, whenever possible.  SaaS, cloud, OSS software options are changing how SMB / Mid-Market buyers expect to purchase software, or software services.

 

à  RFP Q&A – standardized answers

The more likely initiators of RFP requests are the upper tiers of the Mid-Market, rather than “classic SMB”. Most RFP/RFI documents follow a basic format widely used in software industry, with a large majority of questions repeating from buyer to buyer.  So it might be a good idea to build out an engaging presentation of RFP Q&A on the website, utilizing newer media including podcasts and video. If done well (findable-usable-engaging), buyers could find answers on their own, satisfying buyer desire for self-service. Also providing online RFP Q&A could eliminate the time-wasting situation of the vendor being used as “column fodder”.  Online publication of RFP Q&A demands constant updating and refinement to be useful to customers.

 

There are potential hazards for publishing online RFP’s:

· Relevance to buyer needs is not always supported by the usual RFP structure unless multiple RFPs are mapped to various buyer solution scenarios

· Validity of vendor strengths and weaknesses depends on how those strengths and weaknesses map to the most important requirements of each buyer project – generic RFP content may not be able to make a clear assessment and could have negative effect

· Competitors will now know more about how the vendor responds to certain questions while not providing corresponding data on their own websites

So it might be best to provide higher level, but meaty, content for unrestricted access, and then require buyer registration and validation before sharing access to deeper content, especially if a mutual NDA is necessary for more ‘sensitive” information.

 

à  Competitor Comparisons

Software solution buyers often list “competitor comparisons” as a content type that they’d like to find on a vendor website.  However, there are real issues that a vendor must consider before attempting competitor comparisons:

· Mainly, legal constraints related to claims made about what a competitor does or doesn’t do, as compared to the vendor – lawsuits could arise from buyers or competitors regarding claims made

· Even if an “objective” third-party is engaged to create competitor comparisons, such comparisons are frequently tedious and expensive to execute

· Relevance – points in competitor comparisons may not be of importance to all buyers or relate well to their needs

· Commoditization – software offerings in same solution space generally have many of the same feature/functions so competitor comparisons have reduced impact

 

 

Aligning “Findable Web Presence” with Social Selling and Social CRM

Focusing on the buyer-centricity of a vendor’s web presence by improving the findability and usability of the website and by building out proper social media connections to potential buyers also brings alignment with initiatives for social customer relationship management (the strategic practice, not just the technology) and with programs for social selling. This is especially important for SMB / Mid-Market software vendors who need to maximize existing resources for these important initiatives.

 

These three inter-related initiatives nurture quality buyer experiences. And these initiatives are dependent on the vendor being willing to continuously engage in real bi-directional “conversations” with buyers and to act on buyer feedback. Vendors will greatly enhance long-term loyalty, buyer success, and the ability to continuously understand what buyers need by building a composite of excellent web presence / findability / quality content, combined with lively support of social media and true buyer support through social CRM.

 

Social selling taps into social culture and makes use of social media to build relationships and hold conversations with potential buyers. Listening well, presenting compelling content, meeting buyer needs are important aspects of social selling. Likewise, social CRM strives to provide support for buyer success with the vendor’s software offerings, aligned with the “lifecycle of the customer support” (pre- and post-sale).  (More on social CRM for B2B vendors)

 

For social selling, social networking and collaborative sites help sales to connect with buyers on buyer terms:  in venues where buyers are looking for solutions to problems, asking about specific kinds of software solutions, exploring competitor solutions. Sales teams can tap into what matters to potential buyers in order to connect on a real basis. Monitoring social media sites can also help sales teams identify the key influencers for target buyers.

 

 

And Finally, Always Make Sure There’s a Software Solution Worth Buying

Software vendors sometimes forget that it is equally important to deliver quality solutions that are: relatively easy to implement, do the job they’re supposed to do, perform well, and provide clear benefits to the buyer. Quality solutions should be the main objective of any software vendor.

 

 

Related posts:   

B2B Social CRM for Software Vendors and the Lifecycle of Customer Experience

 

Social collaboration in the enterprise: The heart – and goal – of Community is “collaborating people”, not collaboration tools

 

Selling Software Solutions to SMB Markets – Who and How To Target

 

Moving beyond WCM - Web Experience Management software solutions and markets

 

 

 

About the author: Julie Hunt is an accomplished market intelligence analyst, providing strategic market and competitive insights for the software industry. Her 20+ years as a software professional range from the very technical side  to customer-centric work in solutions consulting, sales and marketing.  Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt   For more information: Julie Hunt Consulting – Market & Competitive Intelligence Services  

 

 

The incongruous worlds of “data integration” – Making data accessible for any-size companies

 

Companies of all sizes derive competitive advantage from technology systems that in turn support numerous business applications. Many variations on software solutions populate different kinds of enterprises. Customer relationship management (CRM), sales force automation (SFA), enterprise resource planning (ERP), supply chain management (SCM), and so forth, provide necessary tools for most businesses.  As implemented by enterprise-level, mid-market, and even SMB, companies, the complexity of applications continues to increase, as has the need for continuously integrating and transforming data that provide the life blood for these applications.

Enterprises probably are not spending enough time, money or resources on data integration (DI) software/services – part of the blame may fall to the broad range of options for DI solutions. The current data integration software/services market, while robust, is also highly fragmented and somewhat confusing.  From Enterprise Data Warehousing (EDW) and Master Data Management (MDM) costing millions -- to data mashups, and dashboards based on Excel -- data integration software solutions span a broad spectrum of cost and complexity for all sizes of companies.  DI offerings are proliferating to meet the demands of diverse data management and integration problems.

 

Companies are faced with making decisions about which DI solution, or solutions, to choose – while weighing current and future requirements, cost, usability, reusability, speed to solution.  Instead of purchasing software, many times companies will simply try to build a DI process or solution based on custom code. Custom code has been cited by the industry as the #1 competitor for DI software offerings of any sort, for several years now. But custom code is usually not the best avenue to travel for most DI projects.

 

As has been noted by Rick Sherman, mid-market / SMB companies may not be aware of many newer DI tools that are the right fit for their needs and budgets, and therefore have not seriously pursued the purchase of data integration software solutions, instead of hand coding.  The solutions that are most publicized are the high-end solutions from Oracle, IBM, Informatica, SAP-Business Objects, etc., so it may seem to mid-market and smaller companies that DI tools are expensive and difficult to use.  The high-end vendors are also the usual focus of industry analyst benchmark reports, such as the Forrester Wave and the Gartner Magic Quadrant. But there are many DI software alternatives that could be the right fit for many companies, that are cheaper and easier to use. 

 

 

Source: Gartner

 

 

 

Larger Enterprise Data Integration Software Tools – Gartner definition for 2009 Magic Quadrant

Gartner has defined several classes of functional capabilities that vendors of data integration tools must possess to deliver optimal value to organizations in support of a full range of data integration scenarios:

· Connectivity/adapter capabilities (data source and target support)

· Data delivery capabilities

· Data transformation capabilities

· Metadata and data modeling capabilities

· Design and development environment capabilities

· Data governance capabilities (data quality, profiling and mining)

· Deployment options and runtime platform capabilities

· Operations and administration capabilities

· Architecture and integration

· Service-enablement capabilities

 

Does The Gartner MQ Help Most Companies Select Data Integration Tools?

With its focus on primarily high-end vendors and solutions, the Gartner MQ itself presents only a fraction of vendors that are operating in the overall competitive landscape.  While the Gartner document has provided an extensive list of 40+ vendors that are NOT included in the MQ, there is not enough information to assist with buying decisions. 

 

So the Gartner MQ for DI Tools focuses on solutions meant primarily for larger projects:  EDW, MDM, CDI, B2B data exchanges. It’s not clear if any of these vendor offerings would be cost-effective for less-complex needs. The 2009 MQ does include some DI alternative vendors such as Talend (OSS, cloud options) and Pervasive (on-premise and SaaS/cloud options) – but again, there are many more options available that have not been covered by the Gartner MQ and that companies should definitely explore.

 

 

 

Data Integration Variations – lots of options, which to choose?

 

 

 

 

Integrating data in a way that is meaningful to each enterprise

No matter which integration tools and methods are adopted, data is still the key – whether handled in concrete or abstract fashion. Understanding from a strategic point of view, how the company’s data matters not only to immediate projects/processes, but how it impacts the long-term plans and success of the enterprise, is essential to understanding which tools will be the best choice.  Until recently, most companies have used data integration solutions to solve tactical problems but it’s really time to focus on strategic planning and utilization. 

 

Many larger enterprises have traditionally thought it best to build a foundation of data warehousing and ETL processes, which have proven to be expensive, time-consuming, and frequently insufficient for overall data access needs in the enterprise. This sort of DW foundation can be difficult to implement, maintain, change, or even use. Other difficult – and costly – data initiatives have been introduced into the larger enterprise: master data management (MDM), customer data integration (CDI), complex data.  MDM in concept makes sense, but the pain of making it happen so far has kept many companies from implementations.

 

Companies of all sizes need alternative solutions and new methods that are faster to implement, easier to deploy and use, with more functionality based on OOTB and/or service-oriented architecture.  There has been an increase in pre-packaged, lower-priced offerings that solve specific DI business problems – hopefully this trend will continue.  Industry-specific integrations based on pre-fab templates and integration appliances for CRM, SFA, B2B data exchanges, are also increasing. All of these approaches usually provide tools/services for customizations.

 

Beyond the tools for effecting integration processes, easy-to-use tools are needed for simply understanding and planning strategic architecture for data access and applications, especially tools suitable for mid-market/SMB companies with fewer IT/developer resources. From the “big picture”, companies can design smaller, incremental projects and processes for essential data integration and management.

 

Important to the any-size company is the integrity of the data – “bad” data will render any process or application useless.  Less expensive tools for data profiling and data quality must become available.  Right now most data quality software solutions are expensive and complex. (And hopefully few enterprises are attempting to hand-code data quality processes, as most custom code approaches to DQ come up painfully short.)

 

Overall Data Integration Software Market Outlook Great

Data Integration initiatives, and the sale of DI tools, are proliferating in healthy numbers, especially compared to other software solution segments.  This reflects the value of data accessibility for many company needs, including improving competitiveness via analytics/BI for any-size companies.  Companies are setting priorities for obtaining better, cleaner, and more timely data out of their operational systems.  Data integration software solutions usually provide the best path to achieve such goals.

 

Gartner’s Mark McDonald recently pointed out increases in DI-related spending, commenting that customers will invest "in business intelligence applications and information consolidation in order to raise enterprise visibility and transparency, particularly around sales and operational performance."

 

Phillip Russom of TDWI: "One of the interesting wrinkles here is that these (BI / DI solutions) are now being considered an infrastructure, whose maintenance needs occasional augmentation. This new mindset -- by both technical and business people -- which considers DI/DQ/MDM to be infrastructure [i.e., akin to networks and broadband] is helping these technologies get -- or keep -- resources, despite a lock-down on general IT spending."

 

An IDC report estimates that the worldwide data integration and access software market will grow to US$3.8 billion in 2012, reflecting 8.7 percent CAGR from 2007 to 2012.

 

In the 2009 Data Integration Tools Magic Quadrant, “Gartner estimates the size of the market for data integration tools at approximately $1.34 billion as of the end of 2008, and forecasts growth at a five-year compound annual rate of approximately 9.4%. While the forecast growth has been substantially curtailed due to current economic conditions, this growth rate is very healthy compared with most other software segments.”  Gartner growth estimates calculated earlier in 2008 forecast the data integration tools market at nearly $2 billion by end of 2008, with projected 17% annual growth rate for software and supporting services revenue. (Market Trends: Data Integration Tools, Worldwide, 2007-2012)

 

 

 

About the author: Julie Hunt is an accomplished market intelligence analyst, providing strategic market and competitive insights for the software industry. Her 20+ years as a software professional range from the very technical side  to customer-centric work in solutions consulting, sales and marketing.  Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt   For more information: Julie Hunt Consulting – Market & Competitive Intelligence Services  

Selling Software Solutions to SMB Markets – Who and How To Target

A recent article summarizing a report published by AMI-Partners predicted that software /services markets for small and mid-sized businesses in North America would grow to $35B by 2013.  What then caught my eye was the AMI-Partners definition for the SMB markets:  small businesses have fewer than 100 employees; mid-sized companies have between 100 and 999 employees.

Back to the continual conundrum:  what the heck is “SMB”? 

When talking about target markets for software offerings, the great divide seems to be “enterprise” and “SMB”.  Enterprise registers consistently as any company with revenue of $1B or greater.  For all of the other “non-enterprise” companies (estimated anywhere from tens of millions to 200-300 million globally), people toss around the terms “SMB” / “SME”, with no idea what they mean in relation to actual companies and target markets. Some explanations say that SMB was the North American term, and SME was the EMEA term; others say that SMB is the low-end and the SME is the upper tier of the mid-market.  But these high level explanations still do not clearly define, or usefully segment, the true composition of companies in the vast sea of SMB  (except that revenue will be less than $1B….)

 

Enterprise software vendors don’t know who they are aiming at or how to hit the target

In the past 5 years, more and more large enterprise software vendors claim interest in so-called SMB markets; with the current recession, the noise from these vendors has increased. But most of these vendors really don’t seem to understand how to connect with the actual companies that comprise the vast SMB landscape.  These vendors expound the “right” marketing words, including claims for providing niche and industry-specific solutions for “SMB” companies, but most of these same vendors continue to miss the mark widely.

 

In reality, enterprise software vendors tend to treat the SMB as one market, failing to create in-depth segmentation that will then provide better definition of their offerings and sales approach. The constituents of the SMB landscape have clear differentiation in company size, industry/geographic focus, strategic goals, business needs – really a disparate array of sub-markets. If a vendor pursues this market as a single entity, fragmentation will smack the vendor in the face, resulting in little success and very little learned from the experience.

 

When most large enterprise vendors say “SMB” they really mean “M” – the Mid-Market – and then they usually mean the upper tiers of the mid-market, companies with revenues of $200M - $999M.  And most times the real target group falls in the $500M - $999M revenue range. It is rare for these large vendors to ever reach down to the “S” of SMB.  Even Microsoft frequently misses opportunities with truly small businesses, other than for selling seats for Office or Windows, through its over-complicated licensing and partner relationships.

 

And it’s not just software vendors who can’t seem to get it right. Most software industry writers and analysts wear the same blinders when it comes to discussing SMB market – these writers and analysts usually look at SMB with the bias of “enterprise eyes”, and in doing so, miss salient points frequently.

 

  

Who is the SMB / Mid-Market Company? Understanding more through meaningful segmentation

The biggest mistake many software companies make is to generalize the needs of SMB or Mid-Market companies as one entity, instead of realizing that performing the segmentation and then the analysis of each segment will yield very diverse profiles. These diverse profiles are the keys to software vendors more correctly understanding each segment and then building better solution and sales approaches customized for each segment. Vendors must understand the particular needs of each segment and their sophistication levels, when it comes to software applications. It is also essential to understand that there is even further diversity within each segment of the SMB / Mid-Market. Broad generalizations at any level of the SMB landscape will simply lead to trouble, and limited sales, for the vendor.

 

 

 

What the SMB / Mid-Market Want in Software

SMB / Mid-Market companies use technology to stay competitive and achieve economic success. These companies are not interested in “technology for technology’s sake”.

 

The Upper Tier of the Mid-Market is similar to larger enterprise companies, but there are also differences.

· Software solutions as part of corporate strategy and to drive growth

· Technology as means for achieving core business goals

· Fewer IT resources for implementation, support, maintenance

· Prefer packaged software/services offerings; and offerings from VARs who provide services and support

· Upper Tier contributes most of SMB/Mid-Market spend for software

 

The Mid and Lower tiers have definite challenges when taking on new software solutions:

· Very limited, sometimes no IT resources

· See value of new solutions to optimize productivity but lack resources needed to deploy 

· Opt for less costly options or point solutions; SaaS offerings are growing here

· Prefer out-of-the-box solution sell

· Look to VAR’s, SI’s, solution providers to make sales in these tiers

· Mid-tiers: also purchase from regional or national retail chains

· Lower tier:  more likely to purchase from regional or national retail chains

 

Finding the Right Targets – Segmentation by Revenue

Target market segmentation is frequently handled either using revenue or employee head count, to help determine the size of a company.  In most cases, revenue is the better gauge to determine whether a particular company is a fit (or not) for a particular software offering.  Obviously, revenue indicates a factor of the fiscal health of a company.

 

An important advantage of using revenue for segmentation is that good estimates of available spend for technology purchases can be calculated.  In North America, the SMB / Mid-Market IT average spend is 2-4% of annual revenue (in non-recessionary times). Potential spend will be very helpful in determining which SMB segments are the right ones for a software offering.  Then marketing and sales groups can further refine knowledge of select segments to better connect with software offerings and marketing/sales approaches.

 

The “Microsoft mentality” of focusing on number of seats (head count) as a means of segmenting target markets (rather than revenue) can cost software vendors good customers, especially for business applications.  The ability to pay for more expensive and more complex applications (whether used by a few or many people) is an important qualification for any vendor.  There are many SMB / Mid-Market companies with lower head counts, but substantial capital for purchasing software, and who gain competitive advantage by implementing the right software solutions.

 

A “reconciled” matrix of how to segment “SMB” / Mid-Market companies – based on analysis of multiple sources (industry analysts, software vendors, industry writers -- segmentation definitions from analysts, writers and software vendors are all over the place and do not align cleanly with each other)

 

 

 

 

Target Refinement: Existing software solution ecosystems for each segment

Another definitive method to further understand a particular SMB / Mid-Market segment, and target prospect, is to do an inventory of the software applications currently used by a prospective customer.  A quick analysis of the ecosystem of applications for accounting/ERP, CRM/SFA, databases/servers, network management, will reveal additional factors that will help align software offerings and marketing/sales approaches for target companies.

Discussion with mid-market customers on preferred solution delivery options will reveal strategic direction and will further refine what software offerings to pitch.  More SMB / Mid-Market customers are taking on SaaS-based solutions and are interested in the savings from cloud-based applications.  However, these same companies will still have interest in applications with on-premise licensing.  Differentiating the kinds of software solutions with the preferred delivery options is a necessary exercise to sell into different segments.

 

 

About the author: Julie Hunt is an accomplished market intelligence analyst, providing strategic market and competitive insights for the software industry. Her 20+ years as a software professional range from the very technical side  to customer-centric work in solutions consulting, sales and marketing.  Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt   For more information: Julie Hunt Consulting – Market & Competitive Intelligence Services