Sunday, May 25, 2008

Vendor Survival Guide: Supermarket, Grocery and Kiosk

Many years ago I listened to a presentation by an analyst (I do not remember his name). The presentation includes an analogy comparing IT products vendors to shops: big companies with multiple products lines – supermarkets, medium size companies with few products lines – groceries and small companies – kiosks.

According to the analysis groceries compete directly with supermarkets and therefore their long term survival is questionable because of supermarkets advantages due to their size. In addition they are acquisition targets for supermarkets. Unlike groceries, kiosks are Niche Players and therefore are not acquisition targets and are positioned better than supermarkets in their special niche. For example, who will wait in a supermarket queue for buying bubblegum?

It was easy to find example of small niche software vendors to illustrate this analogy.
The only product distributed by Syncsort was a SORT utility.
Syncsort competed successfully with vendors like IBM, HP and Sun in UNIX installations. Big vendors care less about selling a Sort Utility. Their major focus is Hardware and Software infrastructure (Servers, Storage, Operating Systems, Databases and Integration Software.). IBM can afford to loose to Syncsort as long as it wins the Hardware and Software infrastructure deal. Syncsort survival is al least questionable in case of loosing consistency Sort utility bids to IBM. Therefore Syncsort Sort utility is significantly better than the big vendors' utilities.

This analogy is no more adequate in the SOA age:
  • Kiosks could also be acquisition targets – big companies are buying niche players to complete their Eco Systems functionality.
  • No change for groceries the same analogy is still valid.
  • Independent Supermarkets are also potential acquisition targets by Supermarkets Chains - Big Vendors are acquisition targets for Mega Vendors.
  • New competition to Kiosks by Automated Machines.
Why buying a can of drink in a kiosk if you can buy it for reduced price in less time in an
automated machine? - Small Vendors selling products face new competition in two levels:

First level – Services: SaaS, Web Services and Mashups

Second level - Products: Open Source software products and free of charge
entry-level software products by big and mega commercial vendors limited in
functionality, size and concurrent users.

Flexibility is a must for adaptation to the new situation. Enterprises are not the only ones required to be agile. Vendors Agility is required as well.

No comments:

About Me

Share on Facebook

Labels