May 03

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.


Large Enterprises

Pros:

  1. A single contract can result in tens or hundreds of thousands dollars in revenue.
  2. A well-known enterprise customer can serve as a highly-effective reference to other potential customers.
  3. Piracy is limited because there is often a server component, and also due to corporate liability in using pirated software.
  4. 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.

Cons:

  1. Requires lots of money, time and patience.
  2. Requires a professional sales force.
  3. 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.
  4. The strongest competitor is often the DIY (Do-It-Yourself) mentality common in large enterprises.
  5. Navigating an enterprise’s internal political minefield is often required to seal the deal and can be quite tricky.
  6. Enterprises often require custom work, which can result in additional services revenue, but can also easily swamp or derail a small software company.
  7. 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.

General Consumers

Pros:

  1. The market pool is enormous.
  2. The customer relationship can be handled exclusively over the Web, resulting in huge savings and economies-of-scale.
  3. Put up a web site and shopping cart, and you are in business.
  4. Consumer software is typically less complex and easier to build than enterprise or development software.

Cons:

  1. There is a glut of competition, especially from free and open source software.
  2. Consumers don’t like to pay for software.
  3. Consumers can be difficult to target and reach.
  4. As much as 50% of potential sales will be lost to piracy.

Software Developers

Pros:

  1. Software developers are typically much smarter than the average computer user, hence the support load is greatly reduced.
  2. Software developers are much easier to target and reach than general consumers.
  3. Piracy is limited, since software developers tend to have corporate employers.
  4. Developers will often pay much higher prices for software tools than the average consumer.

Cons:

  1. The market is generally small, especially when selling components of limited scope, or selling products specific to a single operating system or programming language.
  2. When support is required, the problems tend to be quite complex, requiring highly technical and well-trained support staff.
  3. The strongest competitor is DIY (Do-It-Yourself) since many programmers prefer to roll their own solutions.
  4. The web is full of free and open-source code and development tools.
  5. Developers often have highly unique needs and can be very demanding.
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Article published on May 3, 2007




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3 Responses to “Software Markets Compared”

  1. Irishman Says:

    I completely agree. The larger the customer, the bigger the sale but the harder the sale. There is no nirvana. Developers need to look at their product’s use and target market and then build the appropriate tools and infrastructure to support it.

  2. Tweets that mention Software Markets Compared -- Topsy.com Says:

    […] This post was mentioned on Twitter by Yuliya Slipchenko. Yuliya Slipchenko said: Software Markets Compared: http://bit.ly/c5EAtg […]

  3. snoopy Says:

    I just went to the technology conference in San Francisco it was great. I stopped one day to listen Darryl Hammond speak at the OSIsoft conference….WOW

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