If a tech company starts out serving a consumer market, can they later transition to the enterprise market?
Based on what I’ve seen, it’s an uphill battle. Right now, as I write this, I have numerous competitors trying to make the transition.
I’m an Enterprise Guy
If you’ve read my previous posts, you know that I am the CEO of Infinite Convergence and that we are a leading innovator in advanced messaging solutions for enterprises. Through the back-end solutions we provide to enterprise customers, we support 130 million global subscribers and process over one trillion messages per year.
My firm is dedicated to serving enterprise customers. We started with that focus and are unlikely to deviate from it.
In fact, NetSfere, our secure enterprise messaging solution, is the antidote to the problem of employees using personal messaging apps at work. Want to experience cyberbreach in a hurry? Let your employees use whatever messaging software they like when they are working for you, either in the office or at home.
Enterprise Temptation
In contrast to firms like mine, which focus exclusively on enterprise offerings, other companies start out building software or apps for consumers — and then are tempted by the enterprise market.
At some point, somebody says “Can we turn this into an enterprise offering? It seems like that would really increase our valuation and drive up our revenues?”
Then, there’s a scramble, as executives hustle to address the following issues:
- Nobody on our team has enterprise sales experience. We need to recruit a lot of people with a track record selling enterprise technology.
- The product wasn’t built with enterprise users in mind. We need to re-architect and redesign our features to work for companies, not individuals.
- There are entrenched enterprise solutions that are gaining market share. I’m not sure exactly what our enterprise solution is going to be, but we need to go to market ASAP.
Even if the company can address product viability and sales infrastructure for the enterprise market, there’s a final, massive challenge in marketing.
That’s when the CIO says “Wait, you want me to use your product in my enterprise? My kid uses your product. My sister uses it. I can't put your product into my IT stack. No way!”
It's Not Impossible, But...
I’m not saying it’s impossible to cross the chasm from personal software to enterprise software. It does happen.
For example, Google launched search and Gmail for individual use. Eventually, they took those consumer offerings, transitioned into enterprise search and, as we all know, launched Google Apps for Work.
Dropbox made its mark as a personal offering in the cloud-based file-sharing technology space. But now they have Dropbox Business, and some companies currently use it in a enterprise setting.
But enterprise customers and the analysts that advise enterprise buyers are skeptical, and appropriately so.
RSG Senior Analyst, Apoorv Durga, had this to say about personal file-sharing apps making their way to the enterprise:
“Customers should understand that vendors may not share your notions of what ‘enterprise readiness’ truly means. We found significant shortcomings in usability, access control, and in some cases, scalability.”
That’s exactly what I’m talking about. You can’t just slap the word “Business” or “Enterprise” on the end of your app name. It’s not that easy, and enterprise buyers are not gullible, believe me.
Tackling Demanding Enterprise Markets Like Finance and Healthcare
Transitioning a software offering from the consumer market to the enterprise market is most difficult in markets that are sophisticated consumers of technology or that operate in a complex regulatory environment.
NetSfere adoption spans a wide array of industry verticals, but most of our new enterprise customers are coming from the financial vertical (banks in particular) and the healthcare vertical.
There are many reasons that these two verticals are rapidly deploying secure enterprise messaging solutions, and I will be writing about the need for secure messaging in those verticals more in the future. But, with respect to software companies trying to migrate from the consumer market to the enterprise market in these verticals, here are just a few challenges:
- Security — With new high-profile cybersecurity breaches (e.g. the recent Democratic National Committee (DNC) breach) topping the news headlines on a near daily basis, enterprise IT departments have become obsessed with security, as they should be. The fastest way for a CIO to lose his job is for a damaging cyberbreach to occur on his watch. For our messaging solutions, it means communications must be secure all the time — end to end and at rest. This level of security is not typically present in many consumer software applications, making the transition into enterprise a challenging prospect for those who want to cross the chasm.
- Control — The entire point of an enterprise IT group is to ensure that technology use is deliberate and controlled. In contrast, consumers hate to be controlled. This puts enterprise developers and consumer-focused developers at odds. With NetSfere, our enterprise customers require rules-based usage policies with centralized administration. A consumer app typically wouldn’t have launched with that functionality in place, and so their developers are in catchup mode, modifying the consumer-focused architecture to accommodate an enterprise. In my experience, this approach always results in sub-par functionality, compared to a company that designed its software from the ground up to meet enterprise control needs.
- Storage — The third challenge that I see for consumer software transitioning to the enterprise market relates to storage. For an enterprise, records must be searchable and auditable. Consumer software often isn’t built with these features in mind. Bolting them on in a hurry usually doesn’t get the job done.
- Scalability — Finally, service availability is yet another obstacle for the consumer-focused company. For example, NetSfere must be able to send messages reliably without fail. At Infinite Convergence, we handle over one trillion messages per year, in service of NetSfere and our other products. We guarantee fast message send times because that’s what enterprise customers demand. In our messaging space, and in many software application areas, there are only a handful of consumer companies that deliver on scalability at the level we do. Accordingly, when a consumer company transitions to the enterprise market, it’s likely they will experience service interruptions that are very costly to their enterprise customers unlike companies like ours where all of our offerings are built from the ground up to serve the enterprise market.
These are daunting challenges, and only represent the tip of the iceberg. Knowing these challenges, any enterprise organization procuring software should be wary of a company that operates in both the consumer and the enterprise market.
In fact, more often than not, it’s the consumer-focused companies that are failing in the consumer market that decide to move to the enterprise market. The message is “We can’t deliver a quality product in the consumer market, so let’s see if we can sell it to some enterprise customers instead.” Unfortunately, it’s usually not the best or the brightest who try to make the jump from a consumer offering to the enterprise market.
And Now WhatsApp Is Trying to Move to the Enterprise Market
Recently, my thoughts on personal apps going to the enterprise market made its way into a Business Insider article about WhatsApp, a popular consumer app that wants in on the enterprise action.
The article is about whether healthcare organizations should use WhatsApp as their enterprise messaging solution. Here’s the section of the article that featured my input:
“Nevertheless, [despite WhatsApp’s intentions] there are still concerns over the genuine security that end-to-end encryption provides for data on the devices, Anurag Lal, CEO of enterprise messaging solutions company Infinite Convergence told BI Intelligence. This means that while data being transferred between devices is safe, when it is at rest either on the device or on servers, there is no guarantee that the information is encrypted or secure. This could become a massive issue if hospital servers or even individual devices were hacked into or stolen.”
In the real world, no healthcare executive in their right mind would deploy WhatsApp as their enterprise messaging solution, given what’s at stake if sensitive information was compromised due to the use of a personal application that now claims to be an enterprise solution.
Oh, The Irony
It’s somewhat ironic that an article talking about WhatsApp moving to the enterprise healthcare market ran the day after the Electronic Frontier Foundation had this to say about WhatsApp:
“WhatsApp’s plans to share user information–including phone numbers, contact lists, and usage data–with parent company Facebook threaten users’ privacy and control over their data.”
Wait, you’re being accused by an esteemed organization of not protecting sensitive customer data on the personal side of your business. On the other side of the corporate campus, you have an enterprise group that is calling on large organizations and is saying “Don’t worry, you can trust me to protect your sensitive data.” Really?
The Bottom Line
Personally, I buy enterprise solutions from companies that are exclusively dedicated to serving enterprise organizations and have a long track record in doing so.
I’m highly skeptical of companies that started off with a consumer focus and suddenly start to chase the riches of the enterprise market. Their first-generation products are usually weak, and the enterprises that are suckered into them quickly have regrets. Sure, over time, the enterprise product might become palatable. But typically, the consumer company kills the enterprise group and all its offerings, leaving enterprise customers stranded.
So what about you? If you were a senior executive at a large healthcare organization, would you move your organization to WhatsApp to mitigate the many security risks associated with employees using personal messaging apps (e.g. WhatsApp)?
I’d love to hear your thoughts on this. Please get in touch.