Why the enterprise software industry will see incumbents become irrelevant every 90 months?

Enterprise Software: Why the software industry will see incumbents become irrelevant every ~60–90 months

2014: Symantec, BMC, CA, IBM software, Informatica, Concur are still around.

2024: How many legacy vendors are going to be around? How many will be struggling and losing market share at a rapid pace? I have spent a good part of my career understanding the IT pains of large Fortune 500 customers. The reality is that hardware vendors have it easy. Companies have relationships with vendors. Customer-A is an HP shop. Customer-B is pretty happy with EMC as the default storage option. Everybody needs Cisco. The refresh cycle is 4 years and therefore it’s easy for the hardware guys. The incumbents today on the hardware side will struggle by 2024 but will be around. They get more time to wakeup.

In contrast, enterprise software companies, the typical legacy vendors who dominated the market 10 years ago and have stopped innovating, transitioned into maintenance (S&S) mode are going down in the next 10 years. They are in serious trouble. They have to do what MSFT and Adobe have done — switch to a subscription business model & make “SaaS delivery” as the primary software delivery mechanism the top mission in the company.

Note: This requires a culture change. Asking a license product based engineering team to ship software every month is like asking a marathon runner to get into short distance running. Sprinting.

Can be done — but daunting and not for everyone!

Microsoft began in earnest back in 2011. Now in 2014, with Office365 and Azure cloud services the results are showing. The results (monetary and product crispness based on customer feedback loop) will be conspicuous by 2017!

Why are legacy enterprise software companies in serious trouble:

#1 CIO has lost control. It has never been easier to sell directly to the CMO, to the VP HR, to the sales director (not even the VP). Because SaaS companies don’t need to install anything on-premise — they don’t need to kiss CIO’s ass to make a sale. This opens up multiple opportunities for new startups to go in and organically grow. No need to kill the incumbent or get into a fist fight to sell.

#2 SaaS is about choice. Gone are the days when a software sale would require a three year commitment. For all practical purposes, it’s best to not think beyond 12 months — this is becoming a norm. Market crash of 2007 helped CIO’s to switch gears and now only select enterprise vendors have the luxury of closing ELA’s (enterprise license agreement or all-you-can-eat) deals. VMware comes to mind. Therefore, every quarter is an opportunity to knock doors — “we don’t have a budget” or “come back in two years” is not going to be the answer.

#3 Software companies that ship new software every month move at a rapid pace. Legacy vendors ship once a year. They can’t compete. It’s not the same race. When companies move at a rapid pace — the customers usually bring out the right features to the forefront. This is an incredible advantage that was not applicable 10 years ago. The notion of a “pivot” was fairly hard to pull for enterprise companies in the last decade.

New requests can be handled in months as opposed to quarters or many year cycles. This means that customer satisfaction is better by design. “Better by design”.

Just need to listen and filter and prioritize.

#4 New territories are defined and speed matters — mobile is changing the rules. BMC Remedy was a cash-cow not a long time ago in the ITSM space. They got ServiceNow’d.

CA vs. Zendesk is another example. Now with Mobile the battle changes again. It’s not hard to imagine Zendesk struggling to make a dent in the pure mobile support market because it’s a large public company!

Concur software is not the best software stack out there. They have good legacy connectors — integration with on-prem Oracle for example. Therefore it’s hard to throw them out quickly or make a case for rip-and-replace.

The next-gen same-market same-problem solution Expensify can’t compete in a feature war. However, it’s simple — it’s good for SMB’s to begin with. Maybe they will dominate SME’s soon. How much time before large enterprise customers can seriously consider them?

SIEM Industry is going through a rapid transition:

ArcSight->Splunk->SumoLogic

Remember: in the software industry → “Simple always wins!”