<story><title>Why are you still building consumer apps? Enterprise pays 4x more</title><url>http://www.developereconomics.com/still-building-consumer-apps-enterprise-pays-4x/</url></story><parent_chain><item><author>bradleyland</author><text>We&amp;#x27;re in the enterprise space. While I&amp;#x27;m constantly amazed at how much we&amp;#x27;re able to charge for our product, I&amp;#x27;m equally amazed at the reasons deals go sideways.&lt;p&gt;In the consumer space, you&amp;#x27;re working with averages over large quantities. The number of potential buyers is huge, so you need to build a product that, on-average, will result in more sales than non-sales when the customer reaches the point of making a decision. This decision point might happen tens of thousands of times -- sometimes millions -- a year for consumer products.&lt;p&gt;In the enterprise world, the number of sales opportunities are smaller by orders of magnitude. Every sale becomes a huge gamble, and as a result you tend to throw an immense amount of resources at every sale. This is also one of the primary reasons enterprise software ends up so bloated and unmanageable. On the front-end, the decision making process for purchasing enterprise software is driven by checklists and &amp;quot;due diligence&amp;quot; procedures that are horrible at accounting for software quality. You&amp;#x27;re more likely to win an enterprise contract by saying &amp;quot;sure, we&amp;#x27;ll add that feature&amp;quot; than you are carefully explaining how maintaining product focus results in a more usable product.&lt;p&gt;This makes enterprise software a high-stakes game. A sale results in windfall revenue, but a non-sale can severely strain cash-flows. At the end of the day, you&amp;#x27;re still trying to beat the averages, but you&amp;#x27;re working with a much smaller number of opportunities, so wins and losses move the needle in a big way. I think this is a significant incentive for small shops and independent devs to avoid the enterprise space. You need a larger bank roll to attack the enterprise market. We bootstrapped our company, and we hit several gut checks along the way. The days of writing large checks to my company are not quickly forgotten.</text></item></parent_chain><comment><author>mattzito</author><text>Exactly - at my last startup, revenue &amp;quot;lumpiness&amp;quot; was the worst part of the whole thing.  In the early days, we&amp;#x27;d have $0 in bookings one month, and then next month, a check for $800k would come in.&lt;p&gt;Building an enterprise sales funnel is also a challenge.  It takes real discipline to be able to say &amp;quot;100 leads-&amp;gt;25 opportunities-&amp;gt;5 POCs-&amp;gt;3 deals at an ASP of 450k&amp;quot;.  With consumer apps, the volume is so much greater that you can have conversations about A&amp;#x2F;B testing the homepage to drive a few extra percentage points - for enterprise apps, odds are not enough people will ever visit your website to be able to gather enough data to A&amp;#x2F;B test anything.&lt;p&gt;And deals will fall apart for the most random reasons - a regime change at a big bank.  A bigger company releases a product that uses some of the same words as yours, so the customer decides to evaluate it.  Your EU channel partner gets bribed to tank a deal by a competitor.  Anything can happen.&lt;p&gt;True story: we lost a deal once because the customer did a POC, and then fired the engineers who evaluated our software.  With the departure of the engineers who evaluated the software, management lost the use case doc and evaluation criteria that was used by the fired engineers, so they wrote a new use case doc without telling us, scored us based on the new doc (despite never having used our software), then had a competitor come in and execute their POC with the new engineers and new use case doc.  Unsurprisingly, the competitor &amp;quot;won&amp;quot;.   The call with the customer was amazing:&lt;p&gt;Them: You lost because of X, Y, and Z reasons&lt;p&gt;Us: Those weren&amp;#x27;t use cases in the pilot, but even if they were, we can do those things&lt;p&gt;Them: Well...we didn&amp;#x27;t know that you could do them.  But it doesn&amp;#x27;t matter.  We picked the other guys.&lt;p&gt;Us: Where are the people who looked at our software?&lt;p&gt;Them: We had to let them go.  Unfortunately they didn&amp;#x27;t have time to write a report before they left, so we based our evaluation of your software on your user manual.&lt;p&gt;This is one of the reasons why SaaS apps are so appealing on paper.  They have:&lt;p&gt;- Recurring revenue stream&lt;p&gt;- Freemium models allow leads to self-select&lt;p&gt;- Less sales friction (no need to send a sales engineer onsite, just spin them up a free 2-week trial)&lt;p&gt;But there&amp;#x27;s still a ton of money to be made in on-premise enterprise software, it&amp;#x27;s just a long, annoying, dangerous sales process.</text></comment>
<story><title>Why are you still building consumer apps? Enterprise pays 4x more</title><url>http://www.developereconomics.com/still-building-consumer-apps-enterprise-pays-4x/</url></story><parent_chain><item><author>bradleyland</author><text>We&amp;#x27;re in the enterprise space. While I&amp;#x27;m constantly amazed at how much we&amp;#x27;re able to charge for our product, I&amp;#x27;m equally amazed at the reasons deals go sideways.&lt;p&gt;In the consumer space, you&amp;#x27;re working with averages over large quantities. The number of potential buyers is huge, so you need to build a product that, on-average, will result in more sales than non-sales when the customer reaches the point of making a decision. This decision point might happen tens of thousands of times -- sometimes millions -- a year for consumer products.&lt;p&gt;In the enterprise world, the number of sales opportunities are smaller by orders of magnitude. Every sale becomes a huge gamble, and as a result you tend to throw an immense amount of resources at every sale. This is also one of the primary reasons enterprise software ends up so bloated and unmanageable. On the front-end, the decision making process for purchasing enterprise software is driven by checklists and &amp;quot;due diligence&amp;quot; procedures that are horrible at accounting for software quality. You&amp;#x27;re more likely to win an enterprise contract by saying &amp;quot;sure, we&amp;#x27;ll add that feature&amp;quot; than you are carefully explaining how maintaining product focus results in a more usable product.&lt;p&gt;This makes enterprise software a high-stakes game. A sale results in windfall revenue, but a non-sale can severely strain cash-flows. At the end of the day, you&amp;#x27;re still trying to beat the averages, but you&amp;#x27;re working with a much smaller number of opportunities, so wins and losses move the needle in a big way. I think this is a significant incentive for small shops and independent devs to avoid the enterprise space. You need a larger bank roll to attack the enterprise market. We bootstrapped our company, and we hit several gut checks along the way. The days of writing large checks to my company are not quickly forgotten.</text></item></parent_chain><comment><author>nobodysfool</author><text>The many years of &amp;quot;yea we&amp;#x27;ll add that feature&amp;quot; usually means a long lasting enterprise product ends up as a customize-able workflow tool with a customize-able rules engine that stores data as an EAV. It may be slow, but throw enough servers at it, and it can handle your workload. Then you just have presets for each market that you can pre-load the rules and workflows, and data if required. It&amp;#x27;s absolutely crazy. You have to fight to keep your product from turning into an XML parser.</text></comment>