A story this morning in the WSJ illustrates a good point. SAP is suffering from slowing growth in the business software market even though the industry of business software is increasing and spending in this area is on the rise.
The article illustrates a good point that smaller and more innovative companies are creating better applications and getting them to market faster. It points out that businesses aren't spending large sums on new enterprise wide applications as readily as they did a few years ago.
I have often thought that companies like SAP, Oracle, and when they still existed independently, Siebel would run into a wall. There are only so many huge companies in the world and they are only going to spend or upgrade so many times. If you don't have really good mid-market and even small business solutions you might miss an incredible growth opportunity. All of these companies to a large degree have ignored the small business and even mid-market solutions. Unfortunately new and small business is where most of the job and economic growth is coming from and the smaller software companies that can roll out solutions to these markets in a cost effective way are going to beat the big guys that are still chasing huge fish.
The other point along this line is the ability of small companies to simply out maneuver the big software companies. We have all heard the jokes about big companies holding meetings to decide if they need a meeting and having tons of committees and hoops to jump through to act on anything. The large software companies that based their early growth on being quick and nimble are now HUGE companies that can't move as fast or innovate as fast, which is a big weakness in the technology industry. Take a look at Microsoft. They are a good company, but their stock price reflects investors skepticism that they will be able to grow as fast as they did 15 years ago.
One of their greatest strengths of the large technology companies 5-6 years ago is now gone. The growth in Internet technologies and innovative software is not a market that can allow huge companies that can't move quickly stay in control. It is too easy for 2 guys in a garage to start a software company and launch it to a worldwide market over the Internet and start eating the lunch of the big guys.
In addition, being able to create small business and mid-market applications and solutions that can be rolled out quickly and cost effectively without huge specialized teams of developers and high priced consultants will be more attractive to the larger and growing small-mid market companies. If this market is where job and economic growth is at doesn't it make sense this is where business software spending might be occurring at as well?
Guerrilla style marketing and economics is alive and well on the Internet and in technology. Those companies that still practice this will continue to grow. Those like SAP and Oracle, while still very powerful companies with a lot of capabilities, will be having more of those uncomfortable shareholder meetings to explain their lack of performance.
Michael Temple
