How tech challengers can fight and win against the industry's big beasts
To a casual observer it might appear as though the tech sector is all about a handful of dominant brands such as Amazon, Apple, Google and Microsoft. Big Tech’s stock market dominance is hard to miss. And even beyond these big beasts that dominate the popular consciousness, there are many other categories with well-established market leaders, such as VMWare in virtualization or Cisco in enterprise networking, that can appear to have dominant positions.
Yet there are thousands of smaller companies operating in these markets, competing against giants who have a level of resourcing, funding and brand recognition that they could only dream of. So why do they bother and how do they compete? In this article we will look at why there’s always opportunity for tech challengers and how they can thrive alongside the giants.
Dominance can be fleeting
History shows that domination of high-tech categories by a few big names is nothing new. Think IBM in the 1970s, DEC in the 1980s, Compaq and Sun Microsystems in the 90s. Each of these companies for a time seemed untouchable in their respective markets and were regarded as “safe havens”, monopolising the market by sewing “fear, uncertainty and doubt” over lesser-known brands (the old adage “no one ever got fired for buying IBM” springs to mind). But it also reveals that dominant positions are rarely sustained in the tech sector.
Change creates opportunity
B2B tech buyers operate in an environment of continual change, and it is this change that creates opportunities for challengers. Digital transformation is still high on C-suite agendas and companies are looking for new ways to achieve competitive advantage, and avoid the fate of predecessors that failed to adapt to technological change quickly enough.
These competitive pressures are forcing firms to strive for innovation and differentiation, and it’s difficult to achieve differentiation if you’re using the same technology in the same way as everyone else in your industry. Heightened interest in areas such as AI, edge computing, automation, analytics and cloud-native applications is creating opportunities for challengers to displace established incumbents.
Another driver of opportunity is the fact that tech buying is no longer the sole domain of the IT department – it is dispersed across lines of business. This fragmentation of IT purchasing is making it more likely that buyers will diverge from corporate “approved” vendor lists, and source from alternative suppliers who can offer innovative solutions to their specific business challenges.
Big doesn’t always mean better
Market-leaders may have significant advantages – skilled people, funding, networks, brand awareness - but their size can also be a hindrance. Large companies can be slow to respond to changes in market demand, or to bring new innovative propositions to market, due to the level of bureaucracy that is unavoidable in a large organization. They will have more internal hurdles to jump and stakeholders to align, and they can be more risk averse (they have more to lose!) and less flexible.
Smaller businesses, with flatter hierarchies and empowered individuals, can be more agile and innovative. The resource limitations that they work under can also make them more focused, determined and passionate.
Open to innovation
Recent research from Momentum suggests an increased openness to try new suppliers on the part of B2B tech buyers. They found that the proportion of complex, high value solution bids won by incumbents had dropped from 77% in 2018 to 59% in 2022. 
Recent research by LinkedIn suggests that tech buyers actually want both the innovation and flexibility offered by challenger brands, but also the experience and reliability that comes from working with well-known companies. 
Specifically, 76% of technology buyers say they want a vendor that demonstrates deep experience and knowledge, while 45% say that they would consider a new vendor if they are more innovative than the established brands. They also found that buyers in EMEA are more interested in emerging players than ever, with one in three stating they are open to trying a new entrant. 
Brains over brawn
So how can challenger brands thrive in the land of giants? How do they make the most of their advantages and mitigate their weaknesses? Here are a few areas to consider…
- Focus your resources: Instead of going broad, focus resources on the customers where you have the best chance to win. Identify a target segment that has a specific pain point you can address in a superior way and aim to build a position as the “go to” provider in that segment, demonstrating an in-depth understanding of those customer’s specific challenges. By narrowing your focus on a specific segment you can negate some of the resource advantages of larger players.
- Shift the battleground: Tech buyer’s perceived requirements, captured in RFPs and the like, will often be heavily influenced by the solutions they’re already familiar with, even if only at a sub-conscious level. So, on a straight like-for-like comparison it is likely that the established brand will win. You need to change the battleground by challenging buyer perceptions of what’s important, and shifting their thinking in favour of areas where you have a clear point of difference. You can also aim to circumvent existing IT buying relationships by appealing directly to line-of-business buyers and offering better ways to solve their specific business problems.
- Be faster to react: As we’ve discussed, smaller organisations should be more nimble. The advantage this offers is being able to react more quickly to changing market conditions - whether that’s new regulations, supply chain disruption, economic upheavals or emerging technologies. By actively monitoring the external environment, and reacting quickly to forces that create a new opportunity, you can get the jump on larger players that need to navigate ten layers of approval before making any significant change.
- Get personal: Turn your size into an advantage by making your brand more personal and customer-focused. Large organisations can appear “faceless”, but it is easier for smaller businesses to retain the human touch. Use social media marketing and profiling of key individuals to help build and nurture a more human face.
- Be disruptive to get noticed: Journalists, analysts and conferences are always on the look out for new, disruptive ideas and opinions. ‘Proven and well-understood’ doesn’t attract many eyeballs. You can help your brand punch above the weight of your marketing dollars, by offering thought-provoking opinions and insights that challenge conventional wisdom. Of course, you need to back up those opinions with well-reasoned arguments, but being prepared to offer distinctive points of view is a great way to attract attention without needing to splurge large amounts of budget on advertising. And it will help you stand out from larger incumbents who are more inclined to play it safe.
- Build trust and credibility: While being agile and disruptive plays to the strengths of tech challengers, we can’t lose sight of the fact that brand and reputation are important factors when buyers make decisions. It’s vital that you’re doing everything you can to build trust and credibility. Obviously, case studies are like gold dust, but can be difficult to obtain, particularly in sectors like cybersecurity. So you need to look at how else you can build buyers’ confidence in your proposition, whether that’s making your processes more transparent or highlighting the robustness of your finances. The quality of your marketing assets (website, brochures, sales decks) can also help to build confidence.
If you can’t beat them…
The alternative approach to thriving against the giants is to work with them. More and more small and medium businesses are building symbiotic relationships with giants to co-exist for mutual benefit.
You may benefit by using their platform to gain exposure and sales for your brand. The giant will take a % of your profits, but this could be a lower cost to you than the marketing spend required to get the same level of exposure. In this instance, the giant is not a threat but an opportunity to build the scale and reach of your business. For example, all of the major cloud platforms now have marketplaces featuring a range of tools and software vendors. It’s been reported that AWS Marketplace generates between $1 billion to $2 billion in annual revenue. 
It’s the small ones you should worry about!
By working smart you can negate your disadvantages and carve out enough of an opportunity to grow without needing to take on the giants head-on. By establishing a strong foundation to build from, you can then plan your route to become one of the market leaders of tomorrow.
Of course, when that happens you’ll need to worry about the next wave of small businesses with big, transformative ideas coming up behind you!
If you want to find out about how OneGTM can help your go-to-market activities to be more effective in a competitive market, please get in touch.
1. How Executive Buying Behavior and Preferences are Changing: Momentum’s 2022 CBX Research [Wave 1]
2. Technology buying has evolved in the Age of Agility – new research for tech marketers
3. Google lowers its cloud marketplace revenue share to 3% from 20%