Consumerization of Enterprise Software — Part I
Key Trends Fueling a Monumental Shift in How You Work
You’ve heard this phenomenon described in a lot of different ways.
Whether it’s “Bottoms-Up SaaS”, more recently “Low-Code/No-Code”, sometimes “Self-Service” or “Real-Time Collaboration”, “Freemium”, “Consumer-Grade Work Tools” or even more generically just the “Future of Work”. Each of these terms describes merely a piece of the important, unconventional software development and go-to-market strategy shaping B2B technologies today:
Consumerization of the Enterprise
Just as the advent of smartphones and accompanying app stores drove massive innovation across consumer technology, public cloud infrastructure, like AWS, especially enabled a Cambrian-explosion in new SaaS vendors over the last decade. While consumer apps keyed in on ease of use, lowered costs, and mobile functionality, enterprise technology struggled to keep up.
Andreessen Horowitz’s Martin Casado explains in his “B2B Growth+Sales” talk, this delta is because consumer apps prioritized “product simplicity” and wider accessibility, while enterprise technologies were built to focus on maximizing “product value” within the customers’ specifications.
It’s by no means just a recent phenomenon. Michael B. Gilroy wrote about it in 2018, Tom Tunguz covered it in 2015 and David Skok remarked “we’re finally in the fun phase” as far back as 2014. But to appreciate the magnitude of this shift, it’s important to first understand how the needs of the enterprise customer have meaningfully changed. Thus, we can better ride this new wave of enterprise innovation, ready to wash over nearly every business department and industry category in the very near future.
Trends Fueling Consumerization of the Enterprise:
1. Rising Popularity of Freelance & Remote Work
In evaluating the different look and feel of today’s new enterprise tools, we can’t ignore the fact that work-itself looks quite different today than it used to a decade ago. For starters, freelance labor and contingent, project-based work has become an integral part of how companies built products and serve customers. Per Upwork, over 58M Americans will be paid for freelance work in 2019, representing almost 36% of the overall US labor force.
Unshackled from corporate IT, freelancers became a new and growing category of purchasers of enterprise software — be it to manage workflows, track billing and expenses, or acquire and follow-up with potential leads to close sales. Additionally, over 5% of US labor force, both freelance & FTE, now works remotely meaning real-time collaboration tools have become a necessity. A newly mobile workforce also requires tools that are mobile-responsive, all feeding this next, crucial trend.
2. Consumer Fluency with SaaS & Self-Onboarding
Today’s tools look quite unlike the menu- and button-packed enterprise tools of seven, or even five years ago and it’s hard to deny the impact today’s consumer subscription services had on these deliberate design choices. New enterprise tools prize clean user interfaces (UIs) and optimize for user self-onboarding: discovered, tested, purchased, utilized, and upsold — all without classic person-to-person sales.
As consumers gained fluency with paywalls and freemium subscriptions in commerce (Amazon Prime) and entertainment (Netflix & Spotify), they began expecting similar, consumer-grade, self-onboarding UX from their professional software as well. In a classic Innovator’s Dilemma, dominant enterprise SaaS providers with lumbering “value-driven” products requiring add-on services/hand-holding to onboard trial users, became woefully ill-suited for the unassailable shift towards self-service.
Then, what began as IT accommodating employees to “bring your own devices” turned into end-users expecting mobile-versions of all their enterprise tools. Further hampered by their own success, legacy providers (with rare exceptions) unsuccessfully offered the same clunky UI, but now on a smaller touchscreen form factor. Newly-empowered buyers had no choice but to look elsewhere for the same functionality, built mobile-responsive from the ground up.
3. Democratizing Purchasers & Decision Makers
10 or 15 years ago, enterprise software was sold to core IT, as the sole purchaser in the organization. As access became democratized, so have the decision-makers. Empowered by marketing channels and designed with in-product tutorials and chat communication, these tools have closed the knowledge/discovery gap for non-technical buyers. Meanwhile, pay-as-you-use pricing tiers decreased the sticker-shock friction for user adoption by mid-level managers or sub-department heads.
Lowered barriers to entry also changed who could sell SaaS. Whereas top-down enterprise sales required deep industry relationships within the C-suite, bottoms-up SaaS thrives by targeting ideal customer profiles with highly-relevant marketing and delighting end-users with the product experience. Plus, it doesn’t hurt that a marketing “Growth Hacker” salary costs 2x to 3x less than that of a highly-networked VP of Enterprise Sales.
Bottoms-up adoption hasn’t solved every challenge in the sales cycle. Data privacy/security, and customization concerns, still slow adoption. And larger companies still endeavor to consolidate buying decisions as they grow. But, on the whole, this shift massively accelerated the growth of the enterprise user base and has helped upstart SaaS tools compete and generate early traction (even revenue) with little more than an MVP.
Another important by-product of this shift in buyers is that departments once overlooked in software spend now find themselves in the midst of a SaaS Renaissance. If you’re bumping into a new HR recruiting, retention, or rewards tool at every turn, you’re not alone — just look at the pitches in my inbox. Per Blissfully, the HR category alone saw a 122% increase in SaaS spend from 2017 to 2018.
4. Rising Developer Salaries Inviting Low-Code / No-Code Tools
Building functional websites used to require intimate knowledge of HTML/ CSS and was relegated to “webmasters” in the very recent past. Today, Ryan Hoover rightly notes that building websites or other projects online is “no longer limited to the <1% of engineers that can code, resulting in an explosion of ideas from all kinds of people.”
At the enterprise level, the likelihood that a non-tech company can recruit and meaningfully retain top-level engineers has continued to decline, especially as Big Tech happily outbids everyone in the war for technical talent. As Satya Nadella famously said “Every business is now a software business” meaning that after decades of outsourcing their IT departments, major US enterprises now need to bring tech development in-house. But the talent they need, they can’t afford. Even when you’re going to pay-up to hire a software engineer, you’re not going to waste their very expensive time managing database tables or building internal apps from scratch.
This is where tools like AirTable, Webflow, Zapier, and others really shine. These are ideal for non-technical users building functional, albeit limited, internal applications with No-Code. They also allow developers to focus on managing complexities of an enterprise-grade backend via Low-Code while letting non-technical designers or product managers spend time on customizing any specific UI elements. Already built with the non-technical user in mind, Low-Code/No-Code particularly benefits from a “consumerized” go-to-market approach.
However, because Low-Code/No-Code tools need to be optimized for collaboration, modularity, and ease of use “out of the box”, they require an immense amount of user research and testing to build upfront. AirTable CEO Howie Liu recently talked about how easy it is to fall into a trap of “starting with the goal of building something anyone can use [No-Code], but ending up with a clunky UI product that still has to be admin or IT-driven.” We’re still in the early innings but this democratization of enterprise-grade maker tools will be important in the ongoing Consumerization of the Enterprise.
The Long and Crowded Road Ahead
As barriers to entry have fallen, the number of new VC-backed SaaS companies has multiplied, creating immense competition even as the number of departments and industries buying SaaS has grown simultaneously.
Understanding the consumerization trends above and the paradox of choice they've created in the enterprise, it’s clear to me that branding and brand building is poised to play a more critical role in helping the best platforms to stand out. Not just by being fun or inviting to use (though I love Slack’s neverending coleslaw of emojis) but also in the increased number of brand touchpoints and diversity of acquisition channels. Like the “monkey-see, monkey-do” consumer app world, enterprise upstarts will increasingly find their core features aped by better-funded competitors — making marketing, customer service, and brand increasingly important differentiators.
That being said, please don’t fire all your salespeople after reading this! I firmly believe enterprise SaaS tools still necessitate direct selling when your customer size and ACV scales. For now, at least. We’re clearly headed towards a future where hiring your first salesperson can be delayed, indefinitely, in favor of this product-led, marketing-fueled, consumerization strategy.
Next week, I’ll continue my exploration with the challenges of selling “bottoms-up”, how brand plays into enterprise adoption, and where direct selling comes into play in the Consumerization of the Enterprise.
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