The three types of enterprise software

“Enterprise software” can obviously encompass a ton of different products and services, but I find it useful to break down our market into three broad categories that help inform product managers’ vision for their product:

  • Back-office products
  • Iterative products
  • Transformative solutions

One thing about enterprise software that makes it unique from consumer-facing is that its path to market and selling strategy is usually a fundamental part of the product itself. Businesses, especially in the “enterprise tier” (however you care to classify that), do not often buy, adopt or test out lots of software products on a whim; there are just too many legitimate concerns around risk, security, control, etc. Each of these categories has a meaningfully different path to market that product managers have to design for and build a product strategy around, even (or especially) if the ultimate goal is to go up-market (which – spoiler alert! – it usually is).

I’m going to talk a little about each category, how they’re interrelated, and how enterprise products can (sometimes) move between them.

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There are no GAFAs in enterprise

Many of us who run in software/tech circles tend to form exaggerated notions of just how dominant particularly popular vendors are. I ran across some enterprise software market share numbers recently that I think are pretty interesting to illustrate how our perceptions match up to reality.

Salesforce is currently the leading CRM vendor in the world. Yet that market-leading share is only about 18% of their total market:

Of course, this is a particularly Salesforce-friendly report from IDC. Personally, I think it’s exaggerated – I’m not sure I believe Salesforce has literally double the market presence of Oracle or SAP. Gartner put out a report just last year whose extrapolations wouldn’t match this. Different firms, different methodologies, etc etc.

Don’t misunderstand me – Salesforce is an absolutely tremendous company, and their share is growing fast. Yet for all you hear about Salesforce CRM, would you have guessed that, at most, maybe 1 in 6 enterprise CRM customers use them?

Next, consider Slack. Lots of people, especially in tech and media (two industries whose lanes tend to cross a lot), think Slack is utterly ubiquitous. But it is not. Anecdotally, I know swaths of people outside of tech/media who’ve never heard of it. But more interestingly, IDC also says that in the workplace collaboration software market, Slack only commands about 5% of the market. Compare that with 37% for Microsoft, with their Skype for Business and now Teams products.

Again – Slack is a truly tremendous product, and company. (I’ve personally built a game bot on their platform, which was surprisingly cool!) But I suspect that a lot of tech people hold vastly exaggerated ideas about either how widespread they are in their market, or how easy it will be to displace well-entrenched incumbents in a product space that many customers don’t perceive as critical. (I have a different blog post brewing about that last part.)

Personally, I come from the Marketing Clouds world. Market share numbers there are highly unreliable, closely questioned and never really a good apples-to-apples comparison. Nevertheless, the big three – Adobe, Salesforce and Oracle – constitute the biggest part of the market. IBM still owns a surprisingly large chunk of it, too (again, depending on how you slice the numbers).

As I’ve said before, there are no GAFAs in enterprise. There are no monopolists – just some major players who own big slices of the market, and then dozens or hundreds of others behind. Nor do I see this changing anytime soon. This is great news for innovators. Selling in enterprise is difficult, but for the most part, we do not encounter the same kinds of insurmountable obstacles to adoption that most consumer web products do today. That’s cool.

More on this to come.

 

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Adobe and Transformation

I’ve written a bunch lately about enterprise software and why its future looks bright. (Check out Tech Has Grown Up and Enterprise Software and the Deployment Age if you’re interested.) I’m gonna continue with that theme in this post, in which I’m going to hit a pet interest of mine: Adobe.

I think Adobe is one of the best-executing tech companies out there today. Its transformation over ten years from a license-based professional packaged software company for creatives into a first-in-class, multi-segment enterprise SaaS solutions vendor is singularly impressive. The pace of their innovation, to say nothing of their rocketship business results, are almost unparalleled. I’m not just talking about the stock price – when you actually understand what they had to do as a company to get where they are today, you have to be astonished. Neither the tech nor HBR-reading chattering classes seem to give Adobe the recognition it deserves for this turnaround. The latter group of graybeards mostly doesn’t understand the magnitude of what this transformation entailed, and the former is too in thrall to the GAFA glitz to care.

Here’s a look at what this transformation into a cloud vendor looks like:

Adobe full-year segment revenue (all figures in $MM)
2012 2013 2014 2015 2016
Creative Cloud $117 $472 $1,268 $2,265 $3,370
Marketing Cloud $556 $663 $798 $937 $1,180

I’m going to give my own high-level view here of how this transformation took place, why it’s so remarkable, and why anyone in enterprise software has a lot to learn from it. This post wound up being longer than I intended, and there’s still so much to say. But here goes.

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Enterprise Software and the Deployment Age

In “Tech Has Grown Up,” I wrote about how we’re moving into a new stage of the tech industry’s development. A lot of the bigwig tech people around today made their careers (and/or fortunes) in the 2000-2008 GAFA mega-growth cycle, and as a result, over-learned lessons from that period. Since 2008, GAFA has only increased its dominance over the consumer web. As they say, it’s easier than ever to start a consumer-facing company, and perhaps even to advertise for it; but harder than ever to profitably grow.

I mentioned in that post that I’ve been re-reading this talk by Jerry Neumann called The Deployment Age. It’s really excellent. The gist is that cycles of technological progress tend to look like surges of innovation followed by longer periods of adaptation and – you guessed it – deployment. Multiple strands of technological innovation combine to form productive “systems:” think of how steam engines, metallurgy, industrial production and precision machining all had to come together to make railroads possible. It’s pretty clear that similar productive systems using new tech are forming today – indeed, many are already here.

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