Recently, I spent a sometime with other enterprise software executives debating about strategies that make new enterprise software technologies defensible in the current market. By defensible we are referring to the ability of a product or service to retain market leadership after a big competitor decides to create a similar technology or delivery model. Obviously, to defend something you have to own it first so assume that we are referring to technologies with certain customer volume.
Ironically, more often than not I keep hearing my colleagues refer to the stickiness nature of a product as an aspect that makes it defensible. In macroeconomics, stickiness, if often referred to the ability of a variable (like price) to change. In the enterprise software world, we often refer to that term as the probability of a customer switching to a competitive solution once they have adopted a specific product or service.
As much as I can agree with the premise that stickiness presents very tangible benefits to enterprise software companies, I disagree with the thesis that it makes them more defensible. While sticky products or services can certainly achieve large levels of customer retention over time, they still need to figure out how to acquire new customers in a highly competitive enterprise software ecosystem. Just because a customer is stuck with your solution it doesn’t necessarily mean that they are not looking for avenues to switch. Awesome technology, frictionless delivery models, great partner or customer communities or my loved network effects will make your product defensible, stickiness won’t.
As an enterprise software company, it’s important to realize that, as hard that it might be, if your product or delivery model sucks, your customers will eventually find a way to switch to superior solutions. Besides, who likes to live in a world on which your customers are only with you because they can go somewhere else?