IT management software: don't build something too new

Pick any category of enterprise software and you will probably find a whole slew of products that do much the same thing.  And it isn't necessarily the case that the  most interesting, useful or innovative products thrive.  That certainly seems to be the case in IT management software (IT service management, network management, asset management and the like - these are the areas I know best and what I'm referring to here).

Why is this?

Many new products originate in start-up companies.  Even if the company starts with an idea that is truly novel, there are strong pressures to make it sound familiar, not least because the bulk of potential buyers are unadventurous and buy things that sound familiar.  There are other pressures too, such as marketing and visibility.  If you want your product to appear in something like a Forrester "Wave" or a Gartner "Magic Quadrant" then you need to have the analysts recognise your product as one of a number in a more-or-less established category.

So even if you go to the bother of creating something shiny and new, you may well end up trying to make it look familiar.  You don't want to be in a category of one: it's hard to be visible if there are no direct competitors for you, your prospective customer and everyone else to compare you with.

Think about the exits for a software company.  With little happening on the IPO front, the most lucrative exit may well be a sale to one of the existing players.

There's been a lot of consolidation in the enterprise software market.  In the IT management space, it's easy to come to the conclusion that the big four (IBM, HP, BMC, EMC) do no research of their own and instead just buy start up companies to acquire new technology. Of course this isn't completely true, but if you're running a thriving IT management software start-up, selling your company to one of these vendors may well be your fast track to a yacht, bigger house and all the rest.

Each of these vendors wants to have a product in every category, so they end up doing lots of acquisitions, at least one in each category.  If you are not in a recognised category, then you're less likely to be acquired - and your exit is less likely to be lucrative as a result.

So one lesson of IT management software is to build stuff that isn't too new or too remarkable.

I plan to write some more about how this creates opportunities and challenges for new vendors in a future posting. Any comments?