As I’ve been scanning our last five years of headlines and assembling vendors and solutions within the new Intellyx Thought Leadership Finder tool, several realities struck me about what our audience of enterprise buyers is looking for from potential vendors.
Among enterprise software firms — companies large and small intending to sell B2B IT solutions to large companies — nearly half of the brand names disappeared either through acquisition or dissolution. While some of these exits were very positive, and considering how 70-90 percent of startups fail overall, it still leads me to wonder: do companies fail to meet market demands, or did the market seismically change beneath them?
If you are an enterprise technology buyer, have you made any of these seismic shifts in your vendor consideration process over the last five years?
Goodbye ELAs, hello supported SLAs
Buyer organizations are tired of paying for huge enterprise license agreements and renewals, and will only continue to do so under duress from the 2-3 vendors that can charge for ‘keeping the lights on’ with absolutely essential systems. In any case, CIOs are not looking to take on any new big-ticket deals right now.
But paying for guaranteed uptime, compliance and support across a suite of products? That’s exactly the kind of resiliency the company is looking for, and they are generally happy to pay for results and assurances as an operational expense rather than calculating an up-front cost of ownership or the switching cost of something entirely new.
In conjunction with that shift, we find there is still a large seam in demand for always-on security, IT performance monitoring, testing and analytics tools, provided the solutions have enough sophistication and autonomy to get the job done without too many time-consuming false positives.
Constantly rationalizing vendors, but willing to pay service providers
Just because enterprises don’t want any more big up-front deals doesn’t mean there’s seats opening up at the negotiating table for newer vendors. If anything, companies are looking to rationalize their portfolio of software vendors to a manageable handful of contracts.
How can these enterprises stay competitive while simplifying IT, and keep up with the rate of digital transformation at the same time?
More and more, we’re seeing the rise of managed service providers. Whether they come from one of the big consulting forces, system integrators, or specialized cloud service providers, these outside firms are entrusted with strategic buying authority. MSPs can often maintain a higher expertise than the company can afford for itself in evaluating, buying and managing software and installations for the enterprise — it’s a job they’d rather outsource in many cases.
Vendors who fail to feed enterprises through these channels with at least 25 to 40 percent of their growth plan are likely to see rapidly diminishing prospects.
Open vs. closed ecosystems
Enterprise buyer organizations have become extremely perceptive about the openness of their software providers to working with their existing toolsets of choice, as well as future solutions we are not yet aware of.
A vendor that sets itself up as a Swiss-army knife — and says “we do it all” without discussing any meaningful upstream (sell to) and downstream (sell through) technology partners is not likely to play nice with others in the enterprise — and can get left out of the running for that reason alone.
I also mention ‘open’ with some ambiguity here – because it can obviously be associated with the open source movement. Many enterprises insist on leveraging as much open source as possible, not because it is any cheaper in the long run (it may not be once labor is taken into account), but largely because their most valued technical resources demand participation in open source as the most battle-hardened type of software.
Red Hat’s breathtaking US$32B acquisition by IBM was a major wakeup call for the industry, demonstrating that enterprises are more than willing to pay for approved builds and updates of open source suites, and the world’s biggest vendors aren’t done investing. If the total addressable revenue for the broad Linux ecosystem is indeed $10 trillion, other open source projects that can reach even a tiny fraction of that valuation can massively benefit sales for vendors.
Whether vendors are hitched to open source projects in infrastructure, networking, development pipelines, APIs, testing, data, analytics, AI, blockchain, what have you, there are rich veins to continue mining here.
Move from on-premises to SaaS and cloud, to Hybrid IT
Ten years ago, if you predicted that the majority of new enterprise software purchases would go toward SaaS solutions in a public cloud, you would likely be laughed out of any serious roundtable.
Enterprises were becoming familiar with buying SaaS through early leaders like Salesforce CRM, but wasn’t AWS mostly being used to host Amazon’s own stuff back in 2009? Nobody believed Cloud IaaS would propel AWS to become the juggernaut it is today, nor that Azure and GCS would also start rising so fast in revenue.
You could hardly attend a conference in the last 10 years without constantly hearing from vendor CEOs about why enterprises need to become more agile like public cloud-native unicorns Netflix, Uber and Airbnb — or die trying.
Today we are seeing a rather seismic buying shift away from this one-public-cloud fits all future. Massive data breaches, privacy and compliance concerns are driving a new wave of reinvestment back to some private cloud resources in on-premises data centers. But this time, they’re not interested in walled gardens anymore.
Enterprises demand solutions for managing a Hybrid IT future so the right workload can be directed and deployed where it is most suited — often in containers or through a microservices approach — but don’t put the container before the horse!
What’s important is not the deployment technology itself, it is that data and processes should reside and run in the appropriate domain or jurisdiction that is called for, whether for cost, performance and scale reasons, or for security and compliance reasons. Vendors who can remain a part of this critical path to Hybrid IT should be well positioned for the next wave of disruptive change.
The Intellyx Take
There are so many more dimensions to why enterprises invest in technology that you could easily fill a bookshelf with expert opinions and research on the matter (I’d still generally start with the classic Crossing the Chasm).
Remember when ROI was the undisputed king of the enterprise software sale? With skepticism of return-on-investment calculations and a focus on overall business outcomes, we’re advising buyers to put many more factors at play beyond the cost/benefit analysis. The need for resiliency, flexibility to future change, ease of adoption and superior customer experience should all factor just as heavily into these decisions today.
The vendor landscape is still shaking out, and IT buying trends are shifting far faster than we’ve ever seen. But if you are on the buyer side of the relationship, only one emotional constant will still hold true for every vendor you talk to.
Who can you trust?
©2019 Intellyx LLC. Intellyx publishes the bi-weekly Cortex and BrainCandy newsletters, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. Sharing or reprint of this work, edited for length with attribution is authorized, under a CC 4.0 License. At the time of this writing, none of the companies mentioned above are Intellyx customers. Image credit: David Stanley, Siq Chasm (Flickr).
