Highly Competitive - software industry insights

B2B Software Strategies: Startups, Starting from Scratch, Re-Inventing

 

I write a lot about different B2B software solutions and try to provide lots to "chew on" about the good and not-so-good aspects of software offerings in different solution spaces. I constantly look at new thinking and work out my own thoughts and recommendations. Beyond the solutions themselves, I also explore other aspects of providing software solutions: new directions, challenges, internal and external factors, and especially a strong focus on the Customer. Making software that benefits the Customer means creating solutions that work the way customers / users work, adopting more effective customer-focused approaches for marketing and selling, and changing from being tech-centric to solving real customer problems. I suppose I want to help software vendors go into "hype rehab", to be able to do things for real, particularly from the customer perspective.

What I write comes from my direct experience working with software vendors, customers and end users. How I gain that experience comes from what I do for a living: consulting with and advising all kinds of B2B software vendors on product strategy, better sales and go-to-market strategies, the right target markets and customer segments. I want to help vendors create software that really benefits customers and end users, and performs well (you may say I'm a dreamer, but I'm not the only one…).

Over the years I've worked with many different kinds of customers, both for software solutions that I've developed and for packaged solutions from vendors. I respect customers and end users – I also know that customers aren't always right, and don't always have clear motives when it comes to acquiring software. As a solo consultant, I work mostly with startups, and small and mid-sized vendors. I like the mindset of these not-so-large companies and the energy most of them bring to creating software -- but not all of these companies fully understand how to function well as a software vendor that meets customer needs. Just like large software vendors, these companies can get lost in the technology and lose sight of what really matters – if you're in the business of selling software.

    

                                                                                                                         Source: watirmelon.com  

 

 

Software Vendor Strategy

Software technology vendors are challenged more than ever to evolve if they are to survive – this may be even more the case for smaller vendors. Larger traditional software vendors are being challenged by SaaS and cloud offerings, and by customer dissatisfaction with bloated, overpriced monolithic software stacks. Evolutionary pressures are also hitting the software startup world, although many regional start-up communities aren't prepared to recognize such pressures. New ways are emerging for creating new companies that don't adhere to the "old school" startup way of thinking.

Another segment of the software industry that is on the rise relates to companies that re-invent themselves. As companies re-invent themselves, especially smaller vendors, benefits can come from thinking somewhat like a startup, especially when creating a new vision for the company. But these re-inventing companies can also think too much from the startup perspective and forget that they are in a different category with different advantages and challenges.

There are a lot of small software companies that are starting from scratch. But these companies may not exactly fit the "classic" definition of a startup either. Certain "old school" VCs and entrepreneurs only consider a startup to be a company intended for rapid growth through highly disruptive services or solutions intended for a large market, and frequently, to be sold as soon as possible. With today's economic volatility this approach has less effectiveness. The approach is also riddled with subjectivity and ambiguity, and gives rise to endless - and usually pointless - debates about whether certain companies are truly startups.

Whether reinventing or starting from scratch, this question needs to be asked: are your efforts meant to result in flipping the basic company as soon as possible, or do you want to grow into something more? If there are investors, they may push for a quick sale so they can reap their rewards sooner rather than later. So the company should decide early on if the core strategy includes evolution into a mature company. That decision impacts: who should be selected as backers, how to handle employees, who the real target markets and customers are, and many other critical aspects of running a software company.

Focus on Customer for Real Competitive Differentiation

It still eludes many companies (startups, starting from scratch, re-inventing, or well-established) that the "competitive" factors that matter most when it comes to winning and keeping customers center on: solving customer problems; providing ease-of-use for the tasks to be done; creating software that works the way customers work; and ending up with a product that is cost-effective to buy and maintain. A significant competitive edge can come from delivering on the promise: our software will help you and your business in real ways (and won't be a pain to use).

I worked recently with two smaller software vendors: one in the process of re-inventing itself, and one that has been "starting from scratch"…for three years. For this article, it doesn't matter what kind of software solutions they offer, although both are working on SaaS offerings. What matters is how they are going about building their businesses, and whether what they are doing will be effective or not. The two vendors are taking very different approaches to how they are going to market and how they consider the Customer in the equation. It's not a question of which approach is "better" – it's a question of figuring out strategies that will work, and why a lack of strategy usually goes badly.

 

Re-Inventing A Software Company – Lots of Hard Work

My client, the re-inventing vendor, is making a big and very deliberate transition from providing on-premises software to building a fresh SaaS version that truly takes advantage of the SaaS solution delivery model and the notion that software should work the way customers work. A lot of the work that we have done together centers on the fact that going SaaS will transform almost every aspect of the business, from business model to pricing to marketing and sales – and particularly how customers interact with the software and the company.

These following points are at the heart of how my client is going forward:

Necessity: The Mother of Reinvention

A majority of respondents (53 percent) say they have reinvented their business "to stay afloat or competitive." This strategy is reinforced in the current competitive climate that 38 percent of respondents describe as "extremely intense."

"Small-business owners are especially adept at reinvention – whether because of obstacles or new visions for growth," Veltre said. "Change is never easy, but neither is starting and running a business. We see our small-business clients embracing change and reinventing themselves to secure a rewarding future."

As part of the reinvention process, small-business owners say they focused on overhauling the products or services they offered (47 percent).

If small-business owners aren't reinventing their business, they stay sharp and evolve to keep up with the competition. The following steps were cited as ways they kept business thriving:  

88 percent kept updated and knowledgeable about their field

70 percent increased face time with customers

 

It has been exciting to see a company that really understands its original software business now embrace the SaaS platform and build an offering that takes advantage of what works best for customer-focused SaaS, particularly around clean design and usability from the end user perspective. It's also real work to alter management mindsets and help the company realize that it is leaping into a whole new world. The change to SaaS will likely lead this company to increased innovation in what it does for customers.

There seem to be a lot of articles about how traditional vendors often fail at creating SaaS offerings but these articles are generally talking about large companies who obviously come with a lot baggage. Smaller vendors are usually more agile and open to new thinking. They are much more in touch with their customers, and have the real-world experience to avoid certain pitfalls and to hard-earned credibility to a new SaaS solutions platform

To a certain extent, having a startup mindset is useful, especially when taking on a new solution delivery model. The mindset is necessary to be strongly open to change and some very new concepts of doing business. But the re-inventing company must keep in mind that it is not starting over. The company needs to see that many years of experience, lessons learned and a diverse customer base are invaluable, and catapults the re-inventing well beyond a "startup".

This re-inventing company is hungry for real intelligence and insight to be able to formulate good strategies, to understand the new SaaS paradigm, to know how to market to customers, and who those new customers may be. Getting a good feel for the vendor landscape is also essential. For SaaS, web presence and pull marketing escalate in importance; well-informed and well-crafted strategies and tactical implementations for marketing and sales must be based on the right intelligence.

Brand identity is a focus for the re-inventing company, not for competing against larger vendors, but to make clear to customers what the company does, that it does it well and can be counted on as a partner. This company is crafting core concepts around the customer and end user. As to lessons learned that are being applied to the SaaS offering: which current solutions have done well; what customers have indicated they liked and didn't like; unexpected use cases from customer implementations that open doors to niche solutions.

This company has a real commitment to customers and solving problems. This company is learning how to see from the customer perspective. As a step in that direction, they are revamping the current website not only to accommodate a SaaS offering, but to make sure that the website responds to the way customers want to navigate it.

 

"Starting From Scratch" Gets Off on the Wrong Foot – and Stays There

Unfortunately the client that started from scratch is not an inspirational story, but more a cautionary tale. Both from my brief advisory tenure and what I continue to know about the company, this is a company with no focus and no strategy, and apparently no concern that these two essential ingredients are missing from the plan (if there is a plan). "Starting from scratch" is entering its fourth year of existence.

What's the problem? "Starting from scratch" seems to be a vanity creation of the founder, with decisions running on his ego. The founder had previous experience with starting and growing a couple of other small software companies, and has elevated himself to "I can do no wrong". Generally rude and self-involved whether dealing with employees or outside consultants, this founder is a control freak. The final fatal flaws: changing direction constantly, no cohesive vision, and no ability to stick with a solution direction long enough to develop it. These are not pivots – there's simply not enough structure in place to pivot from. More like meanderings.

On face value there is a good idea for the SaaS offering. But it has never been given enough time for definitive development and execution. In fact, very little has been built. A rather large list of vaporware inhabits the corporate website, with a hidden "we will build it if they come" agenda. The company basically waits for a single customer request something that will then be developed as the next app. The flaw of this approach - creating an app for a market of one - should be obvious. Beyond that, the "model" doesn't scale. All the company has is a series of one-off custom apps, just like a developer for hire would do. Brief flights responding to "whim" do not add up to a long term strategy.

Remember, this is a SaaS offering. But there is very little available for subscription. Kind of defeats the purpose. There is no process of testing apps with potential customers for feedback, since there are no apps to test. There is little research on target markets, customer roles and problems to be solved – simply because the founder already "knows" what should be done. Yep.

Marketing efforts are of course scattershot, following the lead of the founder. For example, efforts related to social media are not part of an overall marketing strategy, but are random self-promoting blasts that totally miss the opportunity for interaction on social media. There's no on-going plan, no engagement with potential customers, little creation of useful or high quality content. Just a lot of disjointed activity with no overriding purpose.

With no brand identity or real goals for the development of the offering, this company is playing at business. The founder has failed to define a real solution space, target markets/customers, go-to-market strategy, a business model – and then stick to them long enough to get anything done. For "starting from scratch", a real customer focus is non-existent as far as defining target markets and problems to solve, and then providing a well-developed SaaS offering to do it. Surprisingly this company has VC backers. These backers are in the game because of the founder's previous companies.

There wasn't much that I could do for this company simply because they don't understand what a mess they are in. They had no interest in comprehensive market and customer intelligence, so I simply completed the requested tactical project for them – the end.

 

Devil's Advocate and Tough Love

While my consulting practice officially involves terms like market intelligence, future trends and customer strategy, I frequently think the better phrase is "Devil's Advocate". Most companies, whether re-invented, starting from scratch or a "classic" startup, need a devil's advocate. Partly to counteract all that kool aid drinking so many software companies tend to do. The devil's advocate is needed to dish out a certain amount of 'tough love' to help companies find and navigate a good path for growth and success.

Unfortunately many new companies, or re-inventing ones, rarely budget for in-depth assessments for determining the right strategies for products, go-to-market, customers, and vendor landscapes. These companies need outside perspectives to determine if the company is truly solving customer problems, providing a product that customers want to use, or even for understanding whether the software has value for any customers.

A devil's advocate asks all of the "so what" questions: does the solution matter, is the offering really a solution, who would buy it and why. The devil's advocate helps companies keep an eye on the future, understand the present, and keep looking in the rear view mirror to catch a glimpse of which unexpected vendor may be their next main competitor. B2B software vendors have specialized risks and competitive factors. All too often these vendors are too rooted in the day-to-day to look in any other direction, no matter what stage of development the company is in. Keeping pace with change is critical; change will be constant and sometimes brutal.

Those companies who ignore the coaching of the Devil's Advocate, or don't think they need one, many times achieve these negative distinctions:

• Lack of real innovation – more "me too" masquerading as "new tech"
• Short-sighted approach for employees – now and for future direction
• Too enamored of the tech itself – no sense of why a customer would use it
• No real markets or customers
• Failure to continuously monitor solution space, markets, customers, other vendors
• Failure to constantly test strategies for change, good and bad, and then figure out what actions to take

To prevent bad outcomes, software vendors of any size need real intelligence, real analysis and realistic strategies.

 

 

Related Links

Three Journeys: Lifecycles of Enterprise Software Buyers & End Users

The Irrelevance of Porter's Five Forces for the B2B Software Industry

Customer Buying Criteria - Applying customer & competitive intelligence to selling tools leads to strategic internal benefits

Perception: The Customer Journey and Business Success

Symbiosis: Customer Experience and Business Process

Strategies from Top to Bottom - Content Marketing for B2B Software Vendors

Internal Disruption–No Longer Business As Usual

 

About the author: Julie Hunt understands and sees the overlap and convergence of many business processes and software solutions that once were thought of as "separate" – and how this impacts both software Vendors and Buyers, as well as the strategies that enterprises implement for how technology supports the business and its customers. Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt For more information: Julie Hunt Consulting – Strategies for B2B Software Solutions: Working from the Customer Perspective

A Review of “The New Small”

 

 

 

The subtitle for “The New Small” is: how a new breed of small businesses is harnessing the power of emerging technologies. So first it is important to understand which sorts of companies have become “The New Small” – to be able to appreciate the lessons and guidance provided by Phil Simon in his new book. The New Small are forward-moving, interested in varying degrees of business innovation, reasonably tech savvy, deeply interested in customer success with their services or products, and take the life of their businesses very personally since they are usually doing something they love.

 

The New Small companies do a better job of understanding needs and goals of their businesses – and their customers – before bringing in technology. These New Small-ers want to use tech when it makes sense for their businesses but want to find tech that can provide what they need on an out-of-the-box basis. Then the New Small spend their extra time on customizations – not for the technology – but for the experiences that their customers have with their products and services.

And so in defining the characteristics of companies that adhere to the New Small, Phil also has had the smarts to let the customer stories educate his readers on how the New Small works. Extensive detail is provided in each story to show the business context, how each company embodies the New Small, as well as what worked, what didn’t work – and very importantly, why for each. These real world examples serve to inspire other potential New Small-ers while providing the how-tos.

Phil presents in each story all the salient points to consider when looking at technology as an enabler of the “business of the business”. Risks, rewards, trade-offs are considered, and the questions to ask for decision-making.  “One size does not fit all” when it comes to tech and the New Small – Phil very wisely shows possibilities without proselytizing a sole path to success.

In some ways The New Small is also a very useful compendium of recent publications that cover biz + tech since Phil makes rich use of material from these publications, in context with the different sections of the book. The structure of the book lends itself to a workbook use – in fact I’d love to see Phil add a companion workbook to The New Small, to further aid business innovation through the smart use of tech.

 

Phil Simon’s third book has a special place in my world since I helped bring it into “being”, along with many of Phil’s friends and colleagues. Phil chose to completely own the publishing process and started that process by raising money on Kickstarter to help fund the publication. Phil also had a direct role in the design of the book, and is now busy promoting, which undoubtedly has presented many adventures in further exploring the potential of companies that want to embrace New Small-ism.

 

Related Links:

Achieving the Social Business, Inside and Out

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

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

  

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

 

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