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Ten Major Asymmetries on the Software Market Landscape

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If you consult a thesaurus for words to describe "asymmetry," you will find the following: "Lack of smoothness or regularity: crookedness, inequality, irregularity, jaggedness, roughness, unevenness."

For startup and emerging independent software vendors (ISVs) seeking to win on the 21st century software market landscape, it is such asymmetry or jaggedness that must increasingly become the starting point for marketing strategy development.

Here are 10 manifestations of this market asymmetry that should be on the radar of all software marketers seeking to effectively compete in the 21st century software industry.

1. The 21st century software industry is a superpower-dominated market landscape

Today's software marketers must plan for the permanent reality of high concentrations of cross-category market power in the hands of a select contingent of market superpowers.


Microsoft, the superpower poster child, spans desktop, server, Web portal, handheld, gaming, security, and other formerly standalone categories. Oracle spans multiple categories, from database and application server infrastructure to dozens of enterprise applications. eBay, the superpower of Web commerce, spans auctions, online retailing, payments, VOIP, and more.

This phenomenon of cross-category market power will only intensify.

2. Web-based "Automatic Update" product models optimize customer lock-in

Need a good example? How about Windows Update, in which platform, browser, and enhanced security capabilities are continuously delivered to both enterprise and consumer users, dynamically upgrading the Windows platform despite the multiyear lag time between the release of Windows XP and the new Windows Vista.

Other superpowers are also adept at this software product marketing best practice: e.g., Symantec, which pioneered this approach with its anti-virus products. With this 'high touch' continuous update model driving software products, higher levels of multi-year customer loyalty and 'lock-in' are achievable.

3. Category market-share leaders are vulnerable to "regime change"

Today's software superpowers are not your father's market-share-leading "category gorillas." They possess cross-category, category-extensible market power that enables them to conduct ongoing "regime change" operations against incumbent market leaders. Oracle's M&A takeout of PeopleSoft and Siebel, eBay's takeout of PayPal and Skype, and Microsoft's classic campaigns against WordPerfect, Lotus 1-2-3, Novell Netware, and Netscape are representative examples.

4. Software superpowers are adept at co-opting disruptive technology innovation

IBM and Oracle have embraced Linux, once thought to be a disruptive innovation against incumbent leaders. Oracle, IBM, SAP, and Microsoft have all embraced the on-demand delivery model, similarly positioned by software-as-a-service pioneer Salesforce.com as the death knell for the superpowers. And Web 2.0 and the age of the advertising-sponsored application, largely identified with Google, are now openly embraced by Microsoft.

5. The Superpowers dramatically out-invest VCs in overall R&D/marketing spend

As every good TV detective says, "follow the money." The fiscal 2006 Microsoft R&D/marketing spend of $16 billion dollars is itself twice the total U.S. venture capital investment in all software and Web deals combined. Throw in other cross-category superpowers like Oracle, IBM, SAP, Symantec, Cisco, and others, and you can see the dimensions of the startup marketing challenge begin to emerge. And VC investment is spread across a thousand-plus deals, not concentrated on a single platform agenda, as the R&D/marketing spend of the superpowers.

6. Superpowers join forces to close emerging market gaps

Take the emerging "Web services" category. In 2006, Microsoft and SAP rolled out Duet, a jointly developed offering to connect MS desktop applications to the SAP enterprise services backbone. This alliance serves to close a legacy gap between these two disparate platforms. In the lucrative search category, eBay and Yahoo have teamed up to cope with the Google juggernaut.

Look for more examples of superpower collusion designed as both offensive and defensive strategic moves in 2007.

7. Superpower contention squeezes out "best of breed" challengers

As superpowers Oracle, IBM and SAP contend for dominance in the enterprise, the so-called "best of breed" player is becoming a vanishing species.

IBM has acquired Rational Software (tools), Internet Security Systems (enterprise security), Filenet (enterprise content management) and others. Oracle, as noted, has acquired PeopleSoft, Siebel, Retek, and even an open source database company. And as Microsoft and Symantec slug it out in the consumer PC security category, the challenge for best-of-breed competitors like McAfee and others only intensifies.

8. Distribution channels have become superpower "colonies"

The day of the independent software distribution channel is long gone. Today's software channel participants are increasingly loyal to one or two superpowers that provide them with the sales leads, market development dollars, training, installed base opportunity, and more. They have effectively become colonized by their superpower of choice.

New ISVs seeking to penetrate the channel must be clearly perceived as superpower-aligned if they want to successfully work with these channel partners.

9. Superpowers successfully contain and co-opt new category emergence

Google's acquisition of YouTube is the most recent example of the cooptation of an emerging, as yet unprofitable, category: consumer video sharing. The superpowers are betting that these emerging categories are more explosive when combined with superpower market muscle in a cross-category portfolio. Microsoft's acquisition of Groove Networks, a collaboration platform player, is in the same vein.

This trend means that the "atomic half-life" of emerging categories will be shorter and shorter as the superpowers contend among themselves for the best of the best.

10. Superpowers themselves are now in the new-category-creation business

Microsoft in pen computing, multiplayer online gaming, and wearable computing. Oracle in grid computing. Google in blogging. These are examples of the superpowers initiating and jumpstarting fresh new areas of technology innovation that they can harvest over time. And time is something the software superpowers have in abundance.

Conclusion

So does this jagged or asymmetric 21st century market landscape mean that the sky is falling for startup and emerging software companies? I think not. As Jerry Seinfeld once said to his perpetually in-crisis sidekick George Costanza, "When every instinct you have is wrong, then the opposite would have to be right."

In fact, this superpower-dominated market landscape, unlike the banker-driven landscape of the bubble and rubble years, is the most stable environment ever for new software startups and emerging players to flourish.

But ISVs need to learn to leverage the incumbent-leader dynamics of the superpowers, as Microsoft itself did in its OEM deal with IBM for the original IBM PC, as Adobe did with Apple when it provided the PDF engine for the original Apple LaserWriter printer, and as Google did with Yahoo when it provided the "powered by" search services for the Yahoo portal.

Each of these superpowers, in its own business infancy and adolescence, was adept at leveraging the asymmetric advantage of incumbent leaders. The starting point for this winning approach is a market assessment that takes the jagged or asymmetric nature of today's markets into account.


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Joseph E. Bentzel is the author of the new book, Asymmetric Marketing, Tossing the 'Chasm' in the Age of the Software Superpowers. http://www.amazon.com/exec/obidos/ASIN/1419649809/ He is a marketing strategy consultant and the founder of Asymmetri Incorporated. Contact him at joe@asymmetri.com.

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  • by Nauman Mon Nov 29, 2010 via web

    Reads like a fiction.

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