Best-Kept Secrets in The World of Enterprise Software
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The time is now for enterprise-oriented start-ups founders to leverage the winds of change. Today, a business application software can be developed using considerably fewer resources than what you would have had to invest few years back.
The emergence of many IT firms like TechGroup, IT support specialists from Miami, has made this possible. Additionally, this market is huge, and is still growing very fast. Exit opportunities are very high. All these factors present opportunity for both larger and speedy outcomes in the world of enterprise software.
SlideShare, a San Francisco-based developer of PowerPoint competitor, made $3 million before LinkedIn bought it for $119 million. DemandForce, which developed an application to assist companies to handle their marketing communication had raised close to $12 million before Intuit acquired it for $424 million. Both of these exits happened within three years of the first financing rounds.
The two are examples of how the enterprise software industry is booming. However, this industry has its secrets. This article will highlight some of the best-kept secrets of enterprise software.
It requires less capital to start
Initially, companies entering the enterprise software industry were required to invest large sums of cash. The companies were not assured of ROI as the investments had less potential for speedy outcomes compared consumer internet companies.
However, the positive impacts of cloud computing have significantly reduced the initial capital requirements. This has led to the emergence of new companies in the industry.
Recently, companies in the industry have proved how an enterprise software can be developed at a cheaper cost as it is to other companies who develop consumer products.
Enterprise cloud software is a constantly growing market
Cloud computing has introduced a robust enterprise software activity. This is attributed to the fact that many businesses are moving to SaaS for their IT investments. In 2014, the forecast for IT spending on SaaS solutions was four times compared to traditional on-site solutions. This was a 14% annual rate compared to only 3.4%.
Market expansion in the enterprise world has also been fueled by the pay-as-go subscription model associated with cloud computing. Enterprise software vendors can now target small and medium size businesses.
Statistics indicate that the number of small and medium size businesses in need of enterprise software is 50 times to that of large organizations in need of the same software.
It has better sales efficiency
The sales cycles of SaaS solutions are shorter and do not require the costly external sales teams and agencies. This is because the solutions upfront costs are not expensive and the monthly subscriptions payment plan.
This means that SaaS companies can expand their operations faster and with lower capital requirements than ever before. The new enterprise software sales models introduced by cloud computing are the future of the industry.
Lower risks
Enterprise start-ups have a higher chance of succeeding and having better outcomes compared to consumer internet companies. This is because of the following reasons:
- The subscription plans for enterprise start-ups are based on recurring revenue models. This leads to stable revenue streams.
- Small businesses can use large corporates to acquire the enterprise software. This means that the software is not limited to large companies only.
The consumer internet is more than a hit-based world, where the winner carries everything, and the losers are left without anything at all. Facebook is a good example of this. The risk of failure in enterprise start-up is very low, but the growth potential is higher than that of a consumer company.
Enterprise software companies have better merger, IPO and acquisition outcomes
Large-scale acquisitions of enterprise software companies are a common occurrence today. This trend is not expected to change anytime soon. In the past few years, eight of ten software acquisitions have been enterprise companies.
The enterprise industry’s IPO performance curve indicates positive performance. Recently, enterprise software companies have shown consistency in outshining consumer internet companies.
Actually, the point difference between the post-IPO net performances of enterprise software company compared to a company in the consumer industry was over 50%.
Consumer companies are operating below their initial IPO while enterprise companies are operating above theirs.
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