Singer and pianist Little Richard once said, “It’s not the size of the ship; it’s the size of the waves.” In the waters of enterprise software, ships like IBM, Microsoft, and SAP are well-known names. Their size, breadth of coverage, brand recognition, and market influence reflect their success. As does their revenue. These firms offer broad platforms, unified data models, integrations, and professional services. What else could you ask for?
But combining breadth of coverage and product quality isn’t easy. Forrester's recent research regarding the state of the enterprise software giants in 2023 analyzes six of the largest enterprise software vendors: Adobe, IBM, Microsoft, Oracle, Salesforce, and SAP. In a nutshell, focused giants like Adobe and Salesforce maintain superior product quality over behemoths like IBM and SAP. Here’s why:
- Customer-centricity is key. Adobe and Salesforce prioritize customer focus in their strategies, operations, and product portfolios. The two firms sport offerings including marketing, commerce, and CRM that require attention and investment towards serving customer needs.
- Agility is a prerequisite to innovation. Adobe and Salesforce are giants in their own right but haven’t compromised their agility. They have track records of being nimble and have the resources and know-how to be first movers in the markets they serve. Additionally, their focused product portfolios allow them to specialize in their markets. They’re less inclined to bite off more than they can chew and risk neglecting certain coverage areas.
- Agility and customer-centricity go hand in hand. Customers expect their needs to be met ever more quickly. This is a challenge the focused giants are well positioned to support. Agility breeds innovation, and innovation is best applied to customer priorities.
Forrester further finds that Adobe and Salesforce have maintained consistent quality and performance among their more focused portfolio of software offerings. Their strategy of focus and specialization is far more conducive to software quality and innovation than the “jack of all trades and master of none” strategy pursued by larger firms. Through their agility and customer-centricity, the focused giants have punched above their weight. Meanwhile, IBM, Oracle, and SAP have lower performance in both metrics. Even the largest of ships aren’t immune from running aground. However, note that this dynamic is relative — Salesforce is the behemoth versus a niche vendor laser-focused in an area like email marketing services who may be even more agile and innovative by comparison.
So, what should enterprise software customers do?
- Continually evaluate your strategic partners. The large vendors you use are not fixed in stone. Make sure to conduct a regular analysis (often yearly) of your key strategic vendors and how they stack up for you on dimensions of customer-centricity, innovation, and value.
- Watch out for too much sprawl. Recognize that there are direct costs and risks to having too many vendors in the mix. You’ll erode discount potential as well as create explicit sourcing and management costs. You take on risk if you use a lot of smaller vendors more likely to get acquired or fail versus the big ones.
- Consider the software marketplaces of your strategic partners. One way to balance the stability and simplicity of a large vendor while preserving innovation and agility is to consume partner solutions out of their marketplace, thus balancing speed and risk.
This post was written by VP, Principal Analyst Liz Herbert and it originally appeared here.
