David Menninger's Analyst Perspectives

Fall is a busy time for software industry analysts. It’s a season filled with vendors’ user conferences and some industry conferences. Throughout the course of attending these events I’ve come to the realization that big vendors are often considered the Rodney Dangerfield of the software industry: They get no respect. What I mean by no respect is revealed in snarky social media comments, less enthusiastic coverage by tech media than smaller vendors get and a general sense that big vendors don’t do anything new with their development efforts. However, I suggest this is a shortsighted view of the software world. Smaller vendors serve a valuable function as a source of innovation for the industry, but they get a disproportionate share of attention. I suggest the big vendors deserve businesses’ attention, too, when they consider new software purchases. If we define big vendors as those with at least US$1 billion in annual revenue, the list of analytics and data management software platform vendors includes companies such as IBM, Informatica, Microsoft, Oracle, SAP, SAS, Teradata and TIBCO. Each of these companies generates 10 to 100 times the revenue of even the most successful startup organizations. There are a handful of other large software platform vendors with revenue up to $1 billion such as Information Builders, MicroStrategy, Qlik, Splunk and Tableau. While the newer ones in this group still have some of the “glow” of their startup days, as a whole this group also suffers disrespect similar to the largest companies. The fundamental problem is a mismatch in expectations. As an industry we should not generally expect groundbreaking innovations from the largest software companies. Sure, there are exceptions, but the focus of the large vendors’ research and development efforts is primarily on integrating various capabilities, often the result of an acquisition, and hardening those capabilities to stand up to mission-critical requirements. I recall working for a smaller “innovative” vendor that had hundreds of customers and tens of millions of dollars in revenue; the goal there with respect to workload management was to emulate one of the billion-dollar vendors above. It was considered “the gold standard.” So while the company had some innovative technology, we recognized that enterprises needed the features that larger, longer established vendors had been providing for years. I’ve written about the interrelationship between large and small software vendors before as I described the software industry ecosystem. Small vendors often bring new technologies to market. Big vendors make things work, often in less obvious but also innovative ways. Both of these efforts are indispensable. We kept this symbiosis in mind recently in completing our 2016 Ventana Research Technology Innovation Award Winners. In this list you will see a healthy representation of companies both large and small. Each has a role, so let’s give the big vendors some respect for the value that they provide. Regards, David Menninger SVP & Research Director Follow Me on Twitter @dmenningerVR and Connect with me on LinkedIn.

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