A summary of Conner Forrest’s article “How B2B startups made it back to center stage” (zdnet.com).
In the late 1990s, enterprise software touched already nearly every point in the employee’s workflow. Nevertheless, the interest in enterprise software began to fade. The market was not receptive and the costs to start an enterprise software company were very high. Software was not only expensive to build, it was even more expensive to market and distribute. VC firms stopped investing in enterprise technology and big vendors were forced to optimize for cash flow and maintaining market shares. This is why investing in or acquiring startups stopped.
However, the declining of enterprise innovation did not stop consumer technologies to advance.
People in the 2000s used their own PC to surf the web and get access to things that would help them personally and not only at work. When looking at the building of consumer technology, enterprise startup founders realized that they could make a lot of money if they scaled a B2B company as fast as a consumer company. Following this thought, they identified 4 aspects of building consumer technology products that they wanted to replicate in an enterprise product:
- Building cheaply
- Hosting vs delivering on-premise
- Low-cost sales model
- Quick implementation with client
Together with this business model, consumer innovations such as the collaborative aspect of social media or the accessibility of mobile and Wi-Fi were imported to the enterprise.
In the early 2010s, IT departments, encouraged by a stable market, started to search for new products and services.
It became apparent that the big software vendors can not keep up with the agility or the innovation that came from startup companies. The ability to act agile created three major opportunities for enterprise startups: disruption, R&D in sponsored incubators, acquisition.
Together with the market, the user behavior changed, which would also translate to the enterprise.
The need for products “to just work” led to the demand for automation and quick updates. Besides this, design and usability played a bigger and bigger role.
As the line of who is an enterprise user and who is a consumer user blurs – after all, may it be enterprise or consumer, it is the same person using the technology – products fitting the user’s need for intuitive, visually attractive and easy to use tools had to be created.
Nowadays it is considerably cheaper to build a startup company.
New technologies such as the cloud, platforms and models make it easier, quicker and cheaper to build a startup and it is easier for a B2B startup to grow and meet the needs of large customers.
Enterprise startups are coming back and they are stronger than ever.
Or as Conner Forrest puts it, “Enterprise technology is sexy again.”