We’re quite familiar with a very common business model for enterprise computing technology businesses. This model includes building a Software as a Service (SaaS) system for a niche market, promoting that system exclusively online, dispensing with direct marketing and sales in lieu of simply fielding incoming inquiries. Lots of emerging technology businesses are following this model. Nevertheless, we think the 95/5 rule will certainly apply to these efforts; in other words, 95% of them won’t work out, while a mere 5% will succeed.
We actually like the better odds represented by a diversified services model, the kind of model that we think Dell is following with its recent set of acquisitions of Independent Software Vendors (ISVs). These companies, including Quest Software, offer a series of solutions for the enterprise IT computing market. As Joseph F. Covar noted on July 2nd 2012 in his article Quest Acquisition Opens Door For Dell To Focus On Complete Solutions, Not Parts, we think that Dell is looking to walk in the footsteps of IBM Corporation, in other words, to be synonymous with diversified services and technology advisory for enterprise IT businesses. Of course, the stock in trade for this type of business is building entirely integrated solutions which, we think, promise a very healthy and highly profitable revenue stream.
Of course, scale does matter as businesses compete in this enterprise IT market for diversified technology services and integrated solutions. Nevertheless, picking specific niches with few competitors, but solid interest on the part of the market can open doors for innovative technology businesses to enter the integrated services market for enterprise IT. Historically, companies like Razorfish, Sapient Systems, etc. established a toehold in services markets by offering expertise that was otherwise elusive for enterprise businesses. The pervasive winning formula was to have skilled professionals on the team for highly important marketplace needs that simply had to be filled. Therefore, applying this approach to today’s markets can, and will, produce results as long as product marketing has done its job, in other words, has identified those needs that absolutely must be met where few competitors can meet the requirements.
Successfully entering these markets can be very profitable for emerging businesses. Profits may, in fact, result from a sale of a business to a competitor (this proved to be the case for Razorfish). If you are contemplating entering the services market for enterprise IT systems and feel that you have some compelling technology for needs that are attractive, then we would like to hear from you. Please telephone Ira Michael “Mike” Blonder at +1 631-673-2929 to further a discussion. You may also email Mike at email@example.com.
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