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Blog: Craig Schiff« Useless Consultants | Main | Build vs. Buy » The Mid-Market is HotWe work directly with end users, speak regularly with the key vendors, and also converse with our fellow consulting companies in the performance management space. Over the past several weeks a clear trend has emerged: the mid-market is a key focus area for BPM. On the end user side we are seeing a steady flow of new customers and prospects that fit the typical mid-market profile ($ 500 million or less in revenues). As we meet with vendors we are seeing those that have historically been focused on this market trying to figure out how to win even more of this business. The larger vendors are starting to target this market as well and are putting together comprehensive product and go to market strategies for this group. The consulting companies are trying to understand the dynamics of this market. They are trying to figure out how to play in a market that is very cost sensitive and prefers more packaged solutions. We believe there is a tremendous opportunity here for the solution providers that focus on low total cost of ownership, reduced demand on IT, ease of use, while still being able to handle complexity. The mid-market does not need 'lite' versions of products. They need powerful solutions that will grow with them but are relatively easy to implement and use and priced appropriately for their size.
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Comments
So, Mr. Schiff, now that you've stated the obvious, what INSIGHTS can you provide?
For example, why haven't vendors been able to make inroads into the market? Maybe it's because...
1. Their pricing models suck. No one's been able to figure out BI pricing that reflects derived value for a $20B company vs. a $400M company.
2. The sales model isn't geared to SMB. Sales cycles aren't much shorter for SMB's than larger firms, but the revenue at the end of them sure is less. Until someone figures out how to reduce the sales cycle, SMB's will go nowhere.
A potential solution? Reduce the royalty payout of resellers from the 65%-70% level to 25%-30% for sales to SMB's. Allow them to discount heavily - just demand the 25% of list. The first vendor to do this will gain market share, partners and top line revenue in Year 2 of the program. The future revenue stream from maintenance should also be signficant.
Posted by: IMRS+ARBR=HYSL | May 28, 2006 7:20 AM
There are two main problems in the mid-market - product and sales model. The vendors have either tried to force overly complex IT intensive solutions on this market or developed simple but functionally weak offerings. What's needed is a robust, Excel front-ended(for ease of learning and use)product that is designed for business end user self-sufficiency. I agree with you on the sales channel. The cost of sale is prohibitive at the large vendors. They need to leverage the channel, with a royalty structure that allows for much lower list prices in this market. No one is quite there yet.
Posted by: Craig Schiff | May 31, 2006 10:07 AM
You hit the nail on the head: "What's needed is a robust, Excel front-ended ... product that is designed for business end user self-sufficiency." I use one to great advantage. (No names here?) But the price point is barely tolerable for a $1B company, and out of reach for smaller businesses. Inexpensive options currently add little value for the inteligent business end user.
Posted by: Note in passing | June 2, 2006 3:20 PM