At my previous post I explained why I’ve made the decision to jump on the mISV wagon. Being no expert in business, although my years in the corporate world provided me with a lot of insights, I started my research on possible markets to create a product for.
The very first question that came on my mind was:
B2B or B2C?
Going after business or the consumer next door? After this decision is made, I can deep even further into the chosen market and explore the possibilities of its vertical sub-markets.
To help me on my research, I decided to write down the pros and cons of each market, from the mISV angle of view.
- What makes each market attractive or prohibitive?
- Which market is easier to get into?
- Which market can provide me with a sustainable income over the years?
These and other questions, I’m trying to answer with this post.
Disclaimer:
I’m no business analyst by any mean, these are strictly my personal opinions.
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So, here it is:
Business to Business
Pros
Knowledge of the market
Most mISVers are developers, so they build business applications for a living. This fact allows them to get an insight on how corporations work, what their needs are, etc. The same applies for the consumer market, developers are consumers too, but they see applications differently than a non-technical person; developers use the best software for the job where home users use the best they can put their hands on.
Pricing
Corporations can pay more for an application that will save them money or improve operations. Consumers are used to get everything for free.
Marketing is easier
There’re so many established and proved methods for marketing business, like newsletters, business lists, blogging, etc. To attract consumers online, you mostly depend on SEO, direct marketing is prohibitive for a mISV. At the other hand, If you sell a software package for dentists, you can easily use traditional marketing to get them to buy your product (magazine ads, direct mail, trade shows, etc).
Cons
Technical support
Corporations won’t buy an application unless they’re sure they’ll get good technical support. Most mISVs call it the most important aspect of their business. Consumers can deal with online help or plain email support. Of course, all depends on the kind of software and how easy is too learn and use.
Businesses must won one at a time
Word of mouth works great for consumer products, but in the corporate world amISVer must win one customer at a time. Businesses don’t communicate like home users do. Attracting businesses requires contact with purchasing managers and at the minimum a phone call. Again, all depends on the price tag and the kind of software.
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Business to Consumer
Pros
Larger market
Count the industries build around the consumer (games, movies, music, etc). These industries have multi-million budgets for a product, which will sell to millions of buyers. Businesses are way insmaller quantity but B2B has more vertical markets for a mISV to enter.
“Beehive” effect
A company can built a consumer oriented web site and attract millions, where to do the same with businesses you must have the size of Microsoft. Check any social networking or dating site and you’ll see millions of members using them every day. Only huge corporations have the same audience size in the business to business market. The same applies for both web and desktop applications (P2P, IM).
Cons
Overcrowded
Where there’re bees there’s honey. But with honey comes sting too. Industries with large audiences attract competition. Take for example the gaming industry and the stiff competition new game developers face bringing a new product into a huge but mature market.
Low price products
Consumers don’t like to pay for software and when they have to, they don’t pay much. How many consumer applications cost more than $300? With low price items, a mISV must make up in volume sales to earn a good revenue.
Unpredictable
Consumers can change habits so easy where companies are very reluctant on making changes in existing infrastructures (cost prohibitive, time consuming). See, how many times an average person switches operating systems versus a corporation. I know a few of companies that still use MS Works. In contrast, how many home users are still using Windows 95?
Piracy
A large number of home users use pirate copies of software like games, utilities and others. Businesses at the other side they license every single copy they install. This fact forces developers to use every mean necessary to protect their software.
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Please, comment on the above list and tell me what is more important to you.
Ubercoder.
Posted by ubercoder 
