Strange world of enterprise software

I work for enterprise software company.  Now that I have been wearing product manager hat for about a couple of years, I can see strange dynamics going on within enterprise software business at first hand.  Those of you who had enterprise software business background will know what I'm talking about.  Enterprise software market works with different rules than end-user software market.

Enterprise software often fails because users are
so removed from builder and buyer

Let me give you a few examples.  First is that enterprise software is bought and sold through bidding and negotiation process.  It's what makes enterprise software so expensive to sell and buy.  Although there can be some exceptions, company puts out request for proposal (RFP) to list of vendors in the space.  Vendors submit their own proposal outlining their products and services.  The company reviews the proposals and selects a few vendors for proof of concept (POC), often done deployed and tested in side-by-side comparison.  Then the buyer company makes a tentative decision to go with a winning vendor, and moves on to pilot with small set of users.  Somewhere between POC and pilot, contract is drawn up and purchasing decision is made.

It's really complex and expensive song and dance sequence.  Anyone who knows enterprise software sales will tell you that it takes full time position sometimes working several months to close one deal.  It's not uncommon for a deal to stretch out over a year because of RFP, POC, navigating within the buyer's organization, finding the right decision makers and raising the stake to get the deal closed.  That is why enterprise sales is an art that a few people master, which combines skill of poker champion, gregariousness of extrovert and discipline of TaeKwonDo black belt.

Secondly, the winner in enterprise software is not necessarily the best product in the market place.  It really has very little to do with how well your product is adopted by end users, has user-friendly interface, or even appealing to the users to solve their problem.  This should seem really strange given the fact that company often goes through the bidding process and formal evaluation process among multiple solutions.  Why would these strange rules apply to enterprise software market?

I came to realize that it's because of one simple reason.  It can be explained with one Boolean expression:

Buyer != User

It's because one who makes the decision to buy is not necessarily the user.  In fact it is often times not the user.

Budget is given to department heads, evaluation is done by IT team, purchasing decision is made by procurement team, and roll-out plan is made by project manager.  All these people are influencing the vendor selection process, yet almost none of these people will actually use the product.  This introduces the strange scenarios of buying something that does not even get deployed and used.  Companies routinely abandon the project due to lack of adoption!

But these strange enterprise software rules are showing the signs of change.  That's because every employees in enterprise are making their own choices to buy their own products.  More users are becoming the buyer themselves.  Just take a look around at kinds of smartphones that your friends are using.  I'll bet that most of your friends are checking their work emails on their smartphone that they bought for personal use, and bringing them into the work.

It's not just smartphones.  We also do the same with any hosted services.  DropBox, Yammer and SurveyMonkey are all good examples of these.  We are using or buying the services that we need to get our job done.  Once we are solving the business problem, we then bring it to IT for support.  It's Consumerization of IT, or others call it Shadow IT.  Everyone is solving their own need by using services offered to them, often free of charge to get started.

I see a huge disruption happening because of this equation changing.  We are still at the very early stage of this trend, and I see this trend picking up the steam in coming years.  All enterprise software players would have to start preparing now to be ready for the day when Buyer = User.