Chris Dixon wrote an interesting post the other day about selling new software products to “enterprises”. The big boys. Here is the link. He makes several good points. If your firm is going to invest heavily in developing these kinds of expensive products ($100k or over), the products you are working on better fit into the top 3 priority buying list of the firms you are targeting. I wonder how you manage that risk. And Chris offered this interesting metric
… enterprise-focused VC’s sometimes refer to products priced between (roughly) $5k and $100K as falling in the “valley of death.” Above $100K, you might be able to make a profit given the cost of sales. Below $5k you might be able to market your product, hence have a very low cost of sales. In between, you need to do sales but it’s hard to do it profitably. Your best bet is a “channel” strategy; however, for innovative new products that is often a lot like trying to push a string.
Very interesting. You either go whole hog selling something very big, or go for the tiny off the shelf plug in. The mid range is “death”.
Here is a question. What about the sub-enterprise market? SME’s have tech needs too. But they tend to buy off the shelf. Why not develop a platform targeted to SME’s with an app store? that would give SME’s input into app development, and give more developers ways to meet those needs.
Just a thought.
FOLLOW - Just a coincidence, but NYT ran an interesting article today on changes at SAP to try to adjust to new market realities. Here is a quote
Instead of the big corporate contracts on which SAP built its business, “cloud computing” programs, like Business byDesign, are aimed at small and midsize companies and delivered over the Internet for a monthly subscription fee. To stay current, analysts say SAP must convert itself from a monolithic provider of end-to-end solutions to a nimble provider of easy-to-operate services, and it must do that while defending its existing business.
And raising maintenance fees in a recession? Bad move.