As a vendor, we constantly look at the market to understand where the next competitive threat arises. We're now seeing the next wave of disruption: Analytics-first software vendors.
These are a new class of vendors like Gainsight and C3 who are building applications based on the idea data will drive a transaction, rather than transactions driving the data.
The challenge for every enterprise software vendor is how to respond to this threat because it's going to be difficult. For big vendors, you're going to have vested interests internally who don't see this challenge coming or don't know how to respond to it.
Some may even underestimate the threat of the change. Take SaaS as an example: Who really saw Salesforce coming in the early days? That's exactly what's happening today.
While the software industry is always thought of as innovative, most traditional vendors were innovative 20 or 30 years ago but that’s no longer the case. If you're an enterprise software vendor in the digital transformation era, you fundamentally have four choices.
1. Do nothing
You can do nothing and let this new class of vendor disrupt your market. You could just run your maintenance stream until all your customers churn.
2. Buy and integrate
You can buy and integrate one of these new classes of apps into your own software.
3. Create a new product
You could start from scratch and build a new product yourself. To do something different, some large vendors separate the new product from the rest of the organization.
They create a completely standalone team, which a lot of organizations are doing now by creating innovation functions. This is because the biggest challenge in large organizations is reinvention. There’s an unwillingness to change or an inability to change because the organization is so wrapped up in their existing product.
4. Change your core product
Another option is to change your core product, or essentially fix what you’ve got.
The biggest challenge here is you have to be prepared to throw the baby out with the bathwater. You have to take a long hard look at how you can change your existing product. BMC came close to doing this, they completely rewrote their product in response to ServiceNow. The threat really brought them out of complacency.
When you renovate a house, it’s often cheaper to just pull the whole thing down and start again. That means saying goodbye to all the things you like about your old home, but you do get a new kitchen. Enterprise software vendors need to ask themselves: Is it cheaper to just tear your house down and start again, or do the renovations you need today?
Whatever you choose to do, it has to be brand new, shiny and different. Because if someone's coming towards you quickly, that’s the only survival tactic you have.
Read more: The rise of analytics-first software
The enterprise software space has gone through a mountain of change over the last 20 years, and with it comes a shift toward analytics-first and the augmented consumer. Learn what this trend means for your business here.