Friday, September 07, 2007


Why VC Firms need to network with Enterprise Architects

I am of the belief that many VC firms are making suboptimal investments in software companies and figured I would enlighten them to an emerging perspective of buyers on enterprise software...

Not a single day goes by where multiple software vendors blow up my phone attempting to sell their value proposition. The funny thing is that many of them haven't figured out why they aren't penetrating the interest threshold. Part of the problem is that just because someone finds a gap in their architecture, doesn't mean that it needs to be filled.

Consider the simple fact that any large enterprise has hundreds if not thousands of gaps within their architecture combined with another simple fact that one needs to prioritize their spending to focus on the biggest bang says that the vast majority of value propositions will go ignored.

VC firms could do themselves a big favor by encouraging industry analysts leverage their influence for the mutual benefit of all parties by focusing on spending priorities vs narrow-grained categorization. For example, it is easy to find a comparison of identity management vendors where the likes of Mark Dixon, Pat Patterson, Jeff Bohren, Nishant Kaushik and others will debate the merits of their products but there is no guidance when it comes to whether one should go down the path of identity management or something else. Jackson Shaw, awhile back asked whether folks should focus on identity management or identity consolidation and absolutely no one chimed in. I would have placed bets that folks such as Bob Blakely, Gerry Gebel, Dan Blum, James Governor and Michael Cote would have chimed in but I would have lost money.

Likewise, Marco commented on the need for role mining but didn't provide any of his own thoughts in terms of whether he felt an enterprise should spend money on these classes of tools over identity management, entitlements management or for that matter any other security concern.

I guess everything is important, but what is more important? This is where bloggers will most certainly exercise their rights to remain silent. The funny thing though is that most VC firms have a great sense as to whether unique IP is created and whether it fills a viable gap but that really isn't the whole picture. I suspect that the vast majority of them really have zero clue as to how enterprise architects and other IT executives make decisions in terms of software acquisition.

If you were to look at software from the perspective of a large enterprise, you would see hundreds if not thousands of distinct software vendors and products as part of their portfolio. Each of them takes time to manage. Adding just one more thing may be the breaking point and therefore one of the things that becomes important as part of the decision making process is if one decides to consider a new product, we need to understand minimally what other products we have that it can displace with the ideal situation being displacement of multiple products.

If a vendor and their VC firm start to understand this dynamic then they may also figure out that the sales cycle becomes a lot quicker. Ask yourself, if you are selling to James McGovern and you have a unique value proposition with a strong ROI but requires James McGovern to do lots of internal evangelism versus another software vendor who may not have as strong ROI but displaces say five products the enterprise already uses then which will he pay attention to first?

The funny thing is that folks haven't figured out that if IT can displace software quickly then the procurement cycle is blazingly fast. However, if vendors are doing the same tired pitch of increased revenue, then the IT folks have to work with the business folk to quantify the opportunity which not only takes more time but results in the potential for the opportunity to disappear due to additional scrutiny...

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