Software Vendors Beware – There Are New Threats Emerging

As software vendors try to capture new customers,  increase functionality and increase revenue a factor they may overlooked is not the competition from other vendors but a new type of industry push thats seems to have penetrating unsuspecting vendors.

While competition exists from competitors vendors may overlook a threat of diminishing market share from specialized industry companies starting to make a foray into the software enterprise market.   Companies that are well established and within their industry and are market leaders have now started to expand their business portfolio by adding enterprise software to their specialized services.

Examples of this are manufacturers or suppliers that have a proprietary process or processes that special software was developed to manage these new processes.  These companies have perfected the software to such a custom degree it essentially is the only software of the type or so specialized it serves a specific niche industry.  By creating this software these companies are now turning around  and selling their innovation as a software to competitors and the industry itself.

The major advantage that this brings for these companies is they have already built and proven industry expertise which brings instant credibility to their offering. These newly created divisions of traditional companies which now include software and services do not have to convince customers that they are vertical experts.

The threat is that traditional software vendors may underestimate the possible market erosion that this may pose to a finite market. Since more experienced players within the industry enters software traditional vendors may have a harder time to convince potential customers. This will lead to additional scrutiny within the purchasing process of software selection. This is a common play among manufacturing companies that divest to software. Companies within the aerospace and defense industries have more adopted this model and has stemmed very specialized software.

Other industries are following their lead in divestiture by doing the same thing. Logistics companies that move freight, handle 3PL services, transportation services, customs handling and regulation management, demand planning and warehouse operations has seen a move to this direction also. An example of this is UPS has already a supply chain practice consisting of software selection, integration and implementation. Following the trend is Menlo Logistics a worldwide logistics handler is now offering their own Warehouse Management System as software to be sold separately and assembly will be required. Meaning that the customizations, integration, installation and support will be available for post implementation. Incidentally companies such as Menlo will eventually offer support and maintenance for their system.

Vendors must arm themselves to counter this new threat of market erosion by innovation and winning customers with efficiency, value for the buck and offer superior customer service. In which they already have the edge with the experience of being a software vendor. Quick takeaway – not a threat to be taken lightly.

Eval-Source is an Analyst/Consulting consulting firm that offers enterprise software evaluation, cloud computing consulting, business process optimization and technology planning for organizationsOur innovative professional services make your life easier whether it is to acquire enterprise software  or provide you with fact – based information to match your business with IT. Eval-Source provides critical  decision support to validate your technology investments using the Tru-Eval  system.  Follow our blog at or on twitter @eval_source or our site


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Jim Love, Chief Content Officer, IT World Canada

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