thinks that enterprise software vendors are mistaken when they try to segment buyers according to size. According to Josh, the requirements of software buyers do not vary significantly according to the size of the company. Rather, they are driven primarily according to the organization's view of technology.
Here's my simple market taxonomy, which I believe pretty much spells out the death of the mythical mid-market company.
Market segment #1 consists of buyers for whom IT is a utility, much like electricity and water, that is a basic commodity but has little if any role in defining strategic advantage. IT keeps the lights on, but it is really secondary to the task at hand.
Market segment #2 consists of buyers for whom IT is a major strategic differentiator, one of the things that drives competitiveness and supports innovation. These buyers also use IT to keep the lights on, but the real reason they buy technology is to deploy it at the cutting edges of their industry.
I think Josh is on to something. Nearly all enterprise software vendors segment the market according to size. The reason: it's easy. Deciding whether a lead should be assigned to the direct sales force or to a reseller is simple--just see how large the organization is, either by annual sales or number of employees.
Likewise, business planning is straightforward. How large is the addressable market in a certain territory? Simply count the number of firms in each size category and SIC code. Furthermore, because most vendors price software according to the size of the company (i.e. the number of employees, or number of users), forecasting average selling price in each market segment is a simple calculation.
Carrying the scheme further, vendors often target their product offerings according to the size of the buyer. For large companies, they may sell a full-featured product (e.g. mySAP, or Oracle E-Business Suite). For the so-called mid-market, they may sell a completely different product (e.g. Oracle's J.D. Edwards). Or, they may pre-configure the big-company product into one or more mid-market versions that supposedly represent typical mid-market requirements (both Oracle and SAP utilize this approach as well). The problem is that, invariably, the buyer always seems to need one or two features that are not in mid-market product or the pre-configured template.
As with most sales and marketing issues, the problem is that vendors do not look at the market from the buyer's perspective. Companies do not generally go looking for a "mid-market solution." When they say they do, what they really mean is that they want the mid-market price and ease-of-use. But their primary driver is to find a product that meets their requirements. This leads to all sorts of interesting stories, such as having to convince the vendor that a so-called mid-market company is actually a good fit for the vendor's big company product, or vice-versa. I always find it amusing when I have to sell a prospect to the vendor.
Fortunately, most vendors have a few grey-haired sales types that "get it," in spite of what the program dictates. Finding those individuals is the key.Related postsMaking money in software with a niche-industry strategyHow not to buy softwareThe case against case studies