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| Home - Industry Article - Jan 06 Issue |
2005: A Transition Year for Enterprise Software |
By Radha Basu, CEO, President and Chairman, SupportSoft, Inc.
2005 is best described as a transition year for enterprise software. On the negative side, sales results were mixed for most software vendors. IT budgets continue to be squeezed. Outsourcing options of all kinds continue to receive close inspection. Buying cycles are longer. On the positive side, on-demand and/or IP-based solutions are rising in popularity, technology has grown to become the largest component of capital spending by corporations (representing 40% of total CAPEX) and new market opportunities are emerging with the adoption of technologies such as VoIP, broadband and IPTV.
Another positive we enjoyed during 2005 was the growth in our sales momentum among digital service providers worldwide, which contributed to excitement across the year, including our first sale to India's largest digital service provider. Our investment in India is somewhat unique relative to other technology vendors who simply set up shop in India for low cost R&D. Our goal is to tap into India's talented technical population not simply for coding, but for innovation and local business. As a result, we have been able to harness creative thinking that benefits SupportSoft products worldwide and we are positioned to sustain local R&D investment through sales in India and throughout south Asia.
IT Spending
The biggest business lesson we learned in 2005 was that IT spending is consolidating around fewer, larger vendors. For smaller software companies, it is often a case that you are not competing with companies of similar size and/or solutions, but competing with large vendors for smaller pool of IT budget dollars overall. IT spending for "innovation" today is typically less than 10-15% of a company's total budget. As a consequence, we can't expect the same rate of sales growth for enterprise software we have seen historically. Sales cycles are longer, customer expectations are higher, and the requirements for software vendors to listen closely to customers before, during and, especially, after the sale is more critical than ever. Those companies that wish to sustain long-term success will need to "invest" in their customers to secure strategic relationships that will be rewarded through future sales.
The most intriguing technology lesson we learned was seeing the convergence of the consumer world and the enterprise. In 2005 there has been an increased convergence in consumer-facing technologies that is forcing enterprises to re-inspect their internal software needs. Fast adoption of wireless, VoIP, high speed data access and other forms of IP-based service delivery when combined with an increasingly mobile workforce, is causing enterprises to re-evaluate how they use technology to serve themselves and their customers. Mass adoption of technology is now helping drive enterprise adoption of new solutions.
We anticipated that our direct sales to enterprises would bounce back with a healthier economy. However, despite a relatively robust economy, IT spending patterns remained slow and inconsistent in 2005, making sales forecasting and closure difficult. The good news was that the managed service provider segment continued to show healthy growth for us, so some of the direct sales shortfall we experienced was offset by growth in our indirect channel sales to major corporations.
We understood entering the year that the international marketplace represented a tremendous greenfield opportunity for the company but that we were understaffed to meet anticipated demand. Through highly concentrated prospect focus, strategic hiring, team selling and marketing efforts - plus targeted investments in offshore resources, we were able to successfully scale the company to meet demand. As a result, SupportSoft will more than double the number of international customers we have by the end of 2005 and, just as importantly, create strategic beachheads in multiple geographies for further market penetration in 2006.
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