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My idle thoughts on tech startups

The Consumerization of Business Software

Lee Hower
October 28, 2011 · 3  min.

Reading Time: 3 minutes

One of the themes that we’ve been most interested in at NextView over the last 12+ months has been the impact of consumer web trends on business software.  

I’m not the first person to describe this trend, and my prior background has been primarily as a consumer web guy more than in B2B companies.  But I’ve seen an acceleration of the impact consumer web trends are having on business software, and believe strongly that it will provide a thread of innovation for SaaS companies for the next 5+ years.  The classic delineations of web products for business and consumer (“enterprise” direct selling, on premise vs cloud, etc) are only getting blurrier.

There’s a couple different forces I see at work:

1) Selling & Customer Acquisition – In the last 5 years, the biggest force in business software was the impact of the cloud as an infrastructure layer and product/service delivery mechanism.  But in the next 5 years the web and mobile app stores will increasingly be a force in selling and customer acquisition for busines software.  People have been selling software over the web for awhile and indirect selling via screensharing and webinar, etc isn’t new.  But as social media continues to pervade businesses large and small, and purchase decisions increasingly happen at the user level (see #2) we will see dramatically more customer acquisition happen via the web.  The lessons learned from consumer Web 2.0 companies on user acquisition are increasingly being applied to SaaS companies.    

2) Users Drive Enterprise Tech Adoption – Historically centralized IT departments drove adoption of technology within businesses large and small, but today user-level adoption is the norm.  Whether tablets and smartphones via the BYOD movement or SaaS tools like Yammer, Salesforce, and others (most of which started bottom up at the user or workgroup level, not enterprise-wide from top down), regular users are driving new software purchases.  This is one component of why companies like RIMM are having a tough time of late.

3) UI/UX Matters in B2B – For decades, B2B application developers could skimp on innovating in the presentation layer.  This was in part because purchase decisions were driven by other factors, but also because until comparatively recently most end users didn’t use software and digital media that much in their personal lives.  Now that end users spend as much of their personal time with software (in the form of social networks, tablet/smartphone apps, streaming media, etc) as they do with business software they’ve become much more discriminating buyers. B2B software can no longer just get away with crappy UI… it has to at least match the ease of use and aesthetics of all the consumer web products users love.  

We’ve invested in a bunch of B2B software companies at NextView and I’m thrilled to see them steal pages out of the playbooks of successful consumer web companies.  GrabCAD has used search optimization to drive the bulk of it’s user acquisition, very similar to the way Yelp and others did.  InsightSquared is tackling business intelligence software (hardly a sexy market) with an incredibly sexy product that incorporates Facebook style timelines and other features.  RentJuice is doing much the same in real estate software.  And as B2B selling is increasingly done over the web, SalesCrunch is becoming one of the arms dealers to sales forces everywhere.  I hate indulging in wanton portfolio self-promotion, but my partners & I are incredibly excited about these companies and will undoubtedly continue to make more investments in this vein.  

At present the consumer web is the tail wagging the enterprise dog, in that you see business software companies copying consumer companies’ marketing strategies, product features, etc.  I think this will continue for a few years at least.  But hopefully B2B software companies will innovate in some interesting ways that will bleed into consumer-facing products.  

Lee Hower
Lee is a co-founder and Partner at NextView Ventures. He has spent his entire career as an entrepreneur and investor in early-stage software and internet startups.