ARN's Matthew JC. Powell turned down the lead role in Terminator III to bring you this column of opinions and vague ramblingThe software industry is an odd beast. I'm sure I don't need to tell you that the gap between number one and number two is not insignificant. Even from two to three is a fair drop. From there on, the gaps get smaller and more disputable, until (once you drop out of the top 10) there's really very little difference in revenues or market position between one company and another.
You would think in such an environment that competition between those smaller companies would be fierce, and for the most part it is. There is, however, an odd underside to it.
You see, the top three to five companies have so much market share (and mind-share) that there's really not much left for the little blokes to fight over. The result, in some cases, is not so much a ruthless brawl for every scrap, but rather a battle of concession -- with each vendor delineating for itself such a small and specialised niche that they can eliminate their competitors simply by defining them out of the field.
For example, I've spoken to representatives of a couple of companies in the past few weeks, both of which are in the bottom half of the top 20 software vendors in the world. I won't name them, but trust me that what I say to you is true. Both of these companies' representatives told me they intended to "dominate the market" for their particular type of software. Note that both of them used exactly the same turn of phrase -- and I have the tapes to prove it. Both of them told me all about the fantastic positions their companies held, and both told me why their products were absolutely the best for that type of work.
Neither of them mentioned their competitors.
In both interviews, I thought it odd that they would try and say they were the best without differentiating from any opposing product. It's akin to trying to win a football game by sending out the cheerleaders only.
In the first of these interviews, I asked the company rep: "how does your software compare with [unnamed competitor's product]?" The answer was alarming: "We don't see that as a competitor, because that is x-type management enterprise buzzword blah, [I'm paraphrasing to protect the misguided] and our product is aimed more at y-type management enterprise buzzword blah."
Me: "So you don't target any of the same customers?"
Me: "Would any of the same people who might buy [the other guy's software] see yours as an alternative?"
Rep: "They might, but we don't specifically target those customers."
Me: "Do you think [the other guy] targets your customers?"
Rep: "I wouldn't think so. You'd have to ask them [laughs]."
Suffice it to say that as far as I can tell, there's little difference in implementation between the solutions these guys were peddling and solutions offered by a number of other vendors. I expected the rep to take advantage of my obviously friendly question to give me some neat soundbites about how vastly superior his product is to the opposing one I mentioned. All he gave me, even when I prodded, was guff designed to define himself and his competitors as two different markets.
Good strategy guys. It's easy to dominate a market when you're alone in it.
Bearer of bad news
The other top 20 (but not top 10) vendor I spoke to was not quite so shameless, but per-haps even more alarming. After the rep had spent about 20 minutes or so explaining to me the (quite indisputable) benefits of his product, I said (again, leading for soundbites) that his product seemed to be superior to a similar product which had been written up (in this very paper) a few weeks before.
To my surprise and shock, his face fell. He was (believe it or not) unaware there was a similar product on the market. Even my assurances that his one seemed to have more features and such didn't console him.
There is a warning in this, of course. It would be unbecoming of me to ramble for this long without a moral.
This style of differentiation, pigeonholing yourself and your competitors so that you don't seem to compete, is almost certainly doomed to failure. One day, your non-competitor may decide that they would like your bit of the market too.
An illustration: many moons ago, Digital Research was a major mainstream operating system vendor. Many people used and liked its CP/M software.
It didn't see a certain Washington-based software company as a threat, because it said that company was only into languages. Now that very same company is into languages, operating systems and applications. Hell, even hardware. Where's DR now?