What does a Channel look like that has 100,000 vendors? With all of the talk about mergers, acquisitions and disruptive cloud business models, the pundits have predicted a consolidation in IT vendors over the next couple of years.
I strongly believe the opposite will happen.
Here are 8 reasons why:
1. The barrier to entry is approaching zero. Ubiquitous connectivity driving thousands of inexpensive purpose-built devices supports a cloud environment where traditional research, development, manufacturing and distribution costs evaporate. Highly specialized “apps” solve specific problems and grow organically through word of mouth and unique marketing techniques.
2. A “good enough” philosophy has driven the software industry for decades – this doesn’t improve in the cloud, but in fact gets worse as different business models emerge. Specializations by industry, technology, geography, language, demographics, business models and cost drive the amount of permutations and combinations up substantially.
3. The emergence of freemium price strategies and recurring micropayments attract a new generation of entrepreneurs who grew up in the iTunes generation. The Long Tail of vendors will continue to grow as new monetization scenarios evolve. In a world where the number of eyeballs rule, media and ad supported companies will flourish (check out Spiceworks)
4. Consumerization in the enterprise. Again, somewhat generational is the change of
perception of what makes up a commercial level product versus a consumer one. As a category commoditizes, the price drops dramatically and the device become disposable. The same can happen for software in the cloud, as prices reach zero the category becomes transient in nature.
5. Social media is driving the cost of marketing towards zero. One intelligent and savvy professional can appear like an army and participate in hundreds of conversations per day. While not the top influencer of behavior, social filters are quickly growing in importance in the business community and will take top spot within 3 years.
6. Communities and peer networks have grown in the past 2 years to become the top influencer of business customer buying behavior (Channel behavior as well). Participating in communities does not carry the cost of traditional Channel marketing, but again takes a small number of savvy, plugged in extroverts who appear larger than life.
7. Connectors rule. With thousands of vendors, the importance of social media and communities will continue to grow. When people experience information overload, the common reaction is to shut down and seek out personal filters – even if those filters come from your competitor. Connectors have an innate skill of piecing together a complex ecosystem and making the right social connections. They are usually not technical experts – but relationship experts.
8. With a growing number of communities spread across industry, technology, geography and business model, multiplied by the growing number of communication vehicles ranging from 140 character tweets to multi-day major events, Dandelion Marketing will win the day. Another example of a low cost marketing model, the marketer will pervasively engage in hundreds, if not thousands, of conversations every day. Adding value as opposed to selling, and making the right connections without regard to success or failure of each seed will make these marketers stand out on top.
Now, some of the proof points:
The predictions above are not based on fuzzy math or some level of quantum mechanics. They are simply an extension of trends that are already apparent.
The first example is on the technology vertical side – specifically, CRM. Salesforce.com broke this category wide open but quickly was challenged by over 1,000 competitors. Every single vendor in this space has built a differentiated value proposition, based on some of the things I mentioned above such as industry, product scope, price and customer business model as well as about a dozen more points of specialization.
CRM is the first of more than 40 technology categories that will reach multi-billion dollar status and thousands of competitors.
The second example is in the healthcare industry vertical. The buzz over the past few years has centered around Electronic Medical Records (EMR) and the stimulus funding in the United States. We quickly saw 300 viable EMR solutions surface in the US, with hundreds more coming to market each year that further specialize into the hundreds of niches in this highly regulated market.
EMR is only one category of medical software, with practice management and all of the specialized tools driving better patient outcomes. It is safe to say that there are thousands of vendors already in this industry and things really get interesting when you start to look at the other 26 major industries.
That is how we start to approach 100,000 Channel vendors – 40 technology verticals (and growing) as well as 27 industry specialties. This does not include language variations, government, or geographic specific applications as well as the consumerization of the workplace that will potentially include thousands of consumer applications being run alongside these business applications (read as Facebook, YouTube, Twitter, etc.)
This inevitability leads to significant opportunity for the Channel. Beyond the obvious vendor management opportunities, the skills to navigate this vast marketplace and provide sage guidance to small and medium businesses will be a core competency in a world with 100,000 vendors.