I’m sure there are deep strategic chess-games being played on all fronts in the tech sector, but few are more interesting to see than companies making attempts to try and capture a portion of Microsoft’s multi-$BB Office business. (Does the exact number matter?)
On the one side emerging countries present a brand-new market to tap into that Microsoft does not yet control. The trouble is that these countries have already seen the impact of “vendor-lock-in” with a company like Microsoft, especially when it comes to sensitive data (I wont dive into this because there’s plenty of material available online).
As a result of these lessons learnt, the new countries such as China are inclining heavily towards vendor-independent open software to manage their systems, and thereby putting pressure on companies like IBM. IBM, for these or other reasons, has opted to support development of the OpenOffice product suite (and perhaps as a bit of irony, assigned 35 chinese engineers to the job). The idea, nonetheless, is the same — provide a cheaper, well-supported and standards-compliant alternative product suite for emerging countries.
On the other side, companies are attempting to attack core markets with alternatives that better reflect changing customer needs.
Note: I’m not talking about the SMB market and startups like basecamp or socialtext and others trying to become a better Sharepoint — that’s a different story.
I’m talking about Microsoft’s core enterprise customers — the changes happening here has been a convergence of many different types of needs. On the one side companies need better IT system integration (one vendor providing proven, time-tested solutions) and on the other these companies are looking to shift towards newer and better “team collaboration” systems — an area where the Microsoft stack may not appear “cohesive” enough (i.e. people in this space believe that MS products are built for independent computers, and not for teams).
In this space, companies with a strong presence and support structure like Google seem to be making strides. First, Google and Sun partnered together to distribute Sun’s StarOffice with Google Pack, and then Google announced a partnership with CapGemini just recently which would allow Google to distribute Google Apps to larger enterprise customers.
Where do startups pit in?
In general, this is just too broad a question. However, I think the question is simply a matter of distribution — all businesses succeed by increasing distribution. So the question is does any startup working on software in this area have any secret formula with which they can distribute their products?
For the record, if you reply by saying “well our product XYZ is a web-based AJAX solution, or built on Flash, and hence we already have millions in installed-base that could run our product”, thats not distribution.
The question becomes “How are you going to get a large number of enterprise customers to buy your product?” which invariably leads to “How good of a support structure do you have for those enterprise customers?”
By definition, most startups cannot offer the support structure needed for enterprise customers (unless you really consider making your product open-source) and really, they shouldn’t bother.
It’s crazy enough to want to take up the risk of being a product-based startup, but dont be suicidal and take on an impossible market — you cant beat them on features, distribution, support, brand, sales force and more.
It would be better to stick to a consumer + freelancer + SMB market focus as Preezo, Scribd, Versionate etc are doing. Atleast there you can still gain rapid distribution with a good demo on Youtube.