Enterprise Software Lessons: Tough Competition is Better Than no Competition

13 Sep

Competition is one of the biggest obsessions of enterprise software startups. Whether you are selling a small tool or a complete line of business software, in the enterprise, customers acquire software by going thought detailed processes that typically involve the evaluation of various competitive technologies.

How to differentiate from competitors? Create a better product? Structure a more effective customer acquisition model? These are just are some of the challenges that keep the management teams of enterprise software startups up at night. Quite often, we mistakenly think that all those challenges would disappear if our product was the first, and maybe the only player, in that specific market. However, reality is very different. In the enterprise software world, being the first product to market is a recipe for disaster. Competition in enterprise software can be certainly brutal but facing no competition will almost certainly kill you.

Let me try to explain…..

If you build an enterprise software product that has no competitors, you will most certainly be responsible for defining and nurturing that market category. This typically includes some herculean tasks such as convincing cautious enterprise customers that your product is mission critical to their business, educating the press and analysts about this new market category they never heard of so that they can start tracking the space and writing about your product or convincing investors that the new market is relevant enough to invest financial resources in. If you are the first player in an enterprise software market, those factors become as a key element on the success of your company. If you fail to define and grow the new market, your enterprise software product can become irrelevant or not-mission critical to your enterprise customers. This will only change as new players arrive to the market: competition.

In a large enterprise software market, competitors can indirectly become your best allies. Competitive technologies indirectly help each other by impacting different market aspects such as product pricing, acquisitions, market subcategories, customer segments, etc. As the top competitive technologies in an enterprise software market mature so does the market and, consequently, multiple players can benefit from it.

While doable, the responsibility of defining and nurturing new enterprise software markets result a daunting task for most startups. For an enterprise software startup, is always easier to enter a large market with some competition than facing a potentially large but not well-defined market without any competition. If the market is large enough and your product unique enough, you will find plenty of tangents you can explore to bring a unique value proposition to your customers. As an enterprise software CEO, my advice will be to never be afraid of competition but always be terrified of facing no competition.

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Posted by on September 13, 2012 in Uncategorized


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