Posted by Peter O'Neill on July 20, 2011
Before becoming an analyst serving technology marketers and focusing on the organization and automation of marketing processes, I (Peter O'Neill) had the more traditional orientation of covering a specific market — IT management software (ITMS) in my case. I remember being engaged with several ITMS vendors in the last months of that previous life discussing the same thing: how to address other market segments. Many of them selling in the enterprise segment tended to be tempted into what they call the "midmarket," which is companies with 500 to 999 employees and is perhaps more enterprise-like than small-business-like, so it seems like a safer bet. Forrester names this the "medium-large" segment in our data reports. Some were even ambitious enough to consider the SMB segment.
I was always pretty clear in my recommendations on how to market to the midmarket or SMB segments if you’re an established enterprise software vendor: Develop segment-specific solutions; use a different brand if possible; and know your channels well. None of these things are easy though and, to be honest, most enterprise vendors take the easy way out. They merely:
· Design some cut-down version of their enterprise products
· Tweak their pricing model but then worry obsessively about “cannibalizing” enterprise sales
· Go looking for channel partners but usually end up with the same ones from their enterprise segment
For this reason, enterprise software vendors that have failed miserably to scale down their products or sales channels litter the tech industry.
So it was with great pleasure that I was updated last week about one vendor who has got it right! About 15 months ago, CA Technologies bought the systems monitoring software vendor, Nimsoft, which sold mainly into the midmarket. CA has acquired many vendors, and usually the technologies and personnel are absorbed into CA pretty quickly (IBM is similar, routinely switching on its “blue-screening” program when it absorbs an acquired company). However, with Nimsoft, CA decided to leave the acquired company essentially intact; seed it with extra money and staffing; and charter this organization to sell ONLY to the midmarket through its (Nimsoft’s) existing channels. It also gave the subsidiary responsibility for selling to managed service providers, another segment with different technology and business needs, many of whom sell through to SMBs.
Well, the strategy has certainly worked for CA (and Nimsoft). Since the acquisition, headcount has doubled at Nimsoft, it has a revenue growth of 80%, signing up 240 new customers, and it grew its managed service provider base from 250 to 420 firms. The systems monitoring products could be considered as competing with some of CA’s own monitoring tools, but a clear market positioning strategy has avoided that issue. That’s not all. CA even acquired an IT service desk vendor a few months ago, although it already has a good one, and has integrated that into the Nimsoft offering to cross-sell to existing Nimsoft customers as well as new customers. And there are more such developments in the pipeline. While there are differences in the product lines, the more important differences are the marketing messaging and positioning. Nimsoft is all about “simplicity”.
Now it’s going to be difficult to keep the businesses separate. Some enterprise divisions behave as a midmarket customer and small companies grow. Also the “simplicity” value proposition will appeal to more and more enterprises. So I will expect there to be an element of channel conflict as CA classic competes with Nimsoft for some business. But you know what? That’s OK. As we used to say at HP, you must eat your own dog food. If the CA classic (this is my term, not CA’s) is good enough, it will prevail — if not, then better that Nimsoft win the business compared to a competitor.
Once again, my recommendation for addressing a new segment from an established position: Develop segment-specific solutions; use a different brand if possible; and know your channel well. By the way, this is also what should be done when launching a SaaS solution — the typical “hybrid” approaches that many on-premises vendors have adopted are doomed to failure midterm.
Do you agree? Disagree? Are you involved in marketing strategy and must consider these topics? Please let us know. Perhaps you have executed a best practice that I can share with other Forrester clients. I’d love to hear from you on this.
Always keeping you informed! Peter