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.
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.
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.
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. [1]
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. [2]
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. [2]
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…
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. [3]
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%