Hacking Enterprise IT: Flipping the Model
Note: As a former IBM Architect who loves startups, my sweet spot of the moment is enterprise IT startups (like the one I work for presently). I don’t talk about them as often on this blog as I’d for two reasons. First, they’re not that sexy because 95% of the world (those not making their living in IT) will never ever use them. Second, there just aren’t that many of them, enterprise IT is a big boys game. The game is changing though, it has to. The world of IT is changing too fast for the big boys to keep up with the levels of innovation that the new enterprise will demand, startups will have to play in the space. So, to fill this need I’m going to devote one day a week (Mondays) to Enterprise IT Startups. I will try to keep the conversation at a level that technical readers can enjoy, whether or not they work in Enterprise IT.
I was reading an article about the rising SMB IT budgets and it sparked a thought it my head about the maturation cycle of an IT company. In the past, the general model has been to raise money (or be a spinoff from a big player), create a complex solution that can solve Fortune 500 companies’ IT problems, sell it to those companies for a fortune, create simpler versions of your software that can be sold cheaply to SMBs. This is the model that my current company has taken and it’s not going anywhere.
However, starting about a year ago we began to see companies begin to sell to SMBs first and then mature in to the kind of company that can sell to a Fortune 500. I think we’ll continue to see more and more of this, and there are three good reasons why:
- IT is not advancing at the speed that it once was. Fewer and fewer companies are actually differentiating their business based on the IT services they provide. Consequently, the trend in IT is about finding good solutions for low prices. When it comes to cost cutting and shifting course, it tends to be SMBs who are able to move the quickest and find the most rational solutions for cost cutting. Large organizations, burdened by managers who are always trying to get more budget and more time have to be a little less rational and a little more heavy handed when it comes to cost cutting (e.g. “Fire 20% of your staff or else.”).
- SMB IT environments are simpler. This is true both in the way they’re put together, the applications running within them and the requirements on them. An SMB is a lot less likely to require micro-second latency, have custom-developed solutions that are difficult to understand in their current deployment, or have an application spread across 7 datacenters. Consequently, it is significantly easier to write software that helps SMBs. Following the lean startup model, it might be a good idea to start writing simple software for SMBs, gain revenue, then self-fund the creation of more complicated software for Fortune 500 companies.
- When you combine more effective cost cutting, easier to satisfy requirements and throw in the fact that SMBs are often quicker to act you have an interesting situation where SMBs may actually be doing some things (particularly migrating to cloud) BEFORE their enterprise counterparts. Prior to right now, one of the reasons that startups always started with big companies and then went after the SMB market was because the big companies were always the early adopters. This is not always the case anymore, smaller companies have more to gain with the cloud and many of them are adopting it more aggressively than their big company counterparts.