A few days ago, I blogged about the tangible benefits an enterprise software startup can experience by operating in a competitive market. While competition is certainly good, it can take different shapes or forms depending on the characteristics of the target market. Probably two of the most distinctive types of competition an enterprise software startup can experience are determined by the maturity of the specific markets related to the product.
While is always sexy and exciting to try to provide interesting solutions in brand new markets, an enterprise software startup stands significant better chances of being successful and differentiating from its competitors by operating in an established market going through a transformational process.
Let me try to explain….
Any new hot enterprise software market will, by definition, produce an initial number of that will not only provide software solutions in the space but will also influence the direction of the market. In a new enterprise software market, any startup will face the challenge of competing against new and innovative companies, convince customers about the relevance of the new market and the value proposition of their new enterprise software product.
Despite of the fact that any new enterprise software market produces early adopters, most enterprises are typically cautious when investing in a new technology space. Traditionally, enterprises acquire technologies based on customer references, analyst researches and all sorts of other elements of a well-established industry segment but that are really hard to establish in a new and emerging technology market. From the competitive standpoint, there are no legacy players in a new market; every solution is, by definition, innovative and customer will make decisions based on a somewhat immature understanding of that specific industry segment. All those factors combined make the task of competing in a new enterprise software market an incredible challenge for most startups. The good news is that the rules apply to every player in the space and typically the best team-product-execution combinations will end up dominating that market.
We can find a current example of this phenomenon in the enterprise big data technology space. While big data is one of the hottest enterprise software trends, the space is overly crowded and there are no clear dominant players. Customers are really confused in terms of which technologies to adopt startups are fighting really hard to standup in a large group of innovative technologies and solutions.
Contrary to playing in a new and hot enterprise software market, I firmly believe that enterprise software startups have better chances of succeeding when tackling a well-established market going through a transformational process. A classic example of this model could be the emergence of the CRM online space with players such as Salesforce.com or SugarCRM a few years ago. From a competitive standpoint, the CRM online players were mostly battling against the traditional on-premise CRM vendors such as Siebel, PeopleSoft, etc. In that sense, the incumbents were tackling a well-established market with customers that clearly understood the value proposition and capabilities of CRM technologies but that needed a simpler and more effective delivery model.
In a well-established enterprise software market, startups have the opportunity to differentiate themselves against the legacy technologies in the space; they have access to a mature customer based and they can build on the experiences of the previous market leaders.
As an enterprise software startup, it is important to clearly understand if you are playing in a brand new market or in an existing market going through a metamorphosis. Regardless of the scenario, competition in the enterprise software space is always brutal. However, if you are playing in a hot and large market, sometimes old is better than new 😉