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SmartData Collective > Uncategorized > Who Drives Software Innovation? The “Best-of-Breed vs. Giants” Debate
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Who Drives Software Innovation? The “Best-of-Breed vs. Giants” Debate

Editor SDC
Editor SDC
3 Min Read
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I got an e-mail from a client earlier this week who asked if I’ve ever written about whether more innovation comes from the Goliaths or the best-of-breed vendors. 

I’ve been studying the software industry for nearly 30 years, and have spent the last 21 specifically focused on the enterprise applications market. I’ve certainly talked about this subject, but have never written about it. Until now.

In every case, market sectors were created or developed by small companies. Look at supply chain planning, warehouse management, human resources/human capital management, enterprise asset management, customer relationship management, sourcing and procurement, applications-as-a-service, and the nascent energy and emissions management markets. 

While we can debate whether SAP created the ERP market or has been the primary beneficiary over the last 18 years, it’s important to remember that SAP was a modest-sized company back in 1991 when it launched R/3. It closed 1990 with $313M in revenue. 

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Call me cynical, but I believe today’s large vendors are more interested in commoditization than innovation. Ideally, they want to be able to sell a generic version that will …

I got an e-mail from a client earlier this week who asked if I’ve ever written about whether more innovation comes from the Goliaths or the best-of-breed vendors. 

I’ve been studying the software industry for nearly 30 years, and have spent the last 21 specifically focused on the enterprise applications market. I’ve certainly talked about this subject, but have never written about it. Until now.

In every case, market sectors were created or developed by small companies. Look at supply chain planning, warehouse management, human resources/human capital management, enterprise asset management, customer relationship management, sourcing and procurement, applications-as-a-service, and the nascent energy and emissions management markets. 

While we can debate whether SAP created the ERP market or has been the primary beneficiary over the last 18 years, it’s important to remember that SAP was a modest-sized company back in 1991 when it launched R/3. It closed 1990 with $313M in revenue. 

Call me cynical, but I believe today’s large vendors are more interested in commoditization than innovation. Ideally, they want to be able to sell a generic version that will appeal to customers across dozens of verticals, hundreds of countries, and tens of thousands of customers. For them, true breakthrough innovation doesn’t scale.

The real software innovation will continue to come from smaller vendors. And they will continue to be attractive acquisition targets for the Goliaths.

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