During my 25 years as a software entrepreneur, I’ve had the pleasure and challenge of selling PC software to three major markets: large enterprises, general consumers, and software developers.
Of course, each target market has its own advantages and disadvantages, which I summarize below. Note this list is from the perspective of a small software company (2-50 employees) with limited funds. Microsoft and Google may hold a different view.
- A single contract can result in tens or hundreds of thousands dollars in revenue.
- A well-known enterprise customer can serve as a highly-effective reference to other potential customers.
- Piracy is limited because there is often a server component, and also due to corporate liability in using pirated software.
- End-user support is less because enterprise customers typically provide first level support to their own employees. When support is required, it’s typically second-level support to trained corporate IT staff.
- Requires lots of money, time and patience.
- Requires a professional sales force.
- Deals usually take months to close, and it’s common to work for months on an enterprise deal, only to see it lost to a competitor at the last moment.
- The strongest competitor is often the DIY (Do-It-Yourself) mentality common in large enterprises.
- Navigating an enterprise’s internal political minefield is often required to seal the deal and can be quite tricky.
- Enterprises often require custom work, which can result in additional services revenue, but can also easily swamp or derail a small software company.
- Large enterprises often will not purchase from a small, relatively unknown company unless the solution offered is truly unique in the market, which is rare.
- The market pool is enormous.
- The customer relationship can be handled exclusively over the Web, resulting in huge savings and economies-of-scale.
- Put up a web site and shopping cart, and you are in business.
- Consumer software is typically less complex and easier to build than enterprise or development software.
- There is a glut of competition, especially from free and open source software.
- Consumers don’t like to pay for software.
- Consumers can be difficult to target and reach.
- As much as 50% of potential sales will be lost to piracy.
- Software developers are typically much smarter than the average computer user, hence the support load is greatly reduced.
- Software developers are much easier to target and reach than general consumers.
- Piracy is limited, since software developers tend to have corporate employers.
- Developers will often pay much higher prices for software tools than the average consumer.
- The market is generally small, especially when selling components of limited scope, or selling products specific to a single operating system or programming language.
- When support is required, the problems tend to be quite complex, requiring highly technical and well-trained support staff.
- The strongest competitor is DIY (Do-It-Yourself) since many programmers prefer to roll their own solutions.
- The web is full of free and open-source code and development tools.
- Developers often have highly unique needs and can be very demanding.
Article published on May 3, 2007
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