SaaS Vendor Consolidation

Many vendors and products have been able to stay around the last few years or so because they've been on corporate welfare or subsidized by VC dollars. That's starting to change with more discipline on spend and what is a nice-to-have vs a need-to-have.

As companies have expanded from one product to multi-product, a lot of great tools become no longer necessary (even though they're great tools). Many point solutions now are trying to make the crossover to platforms. The allure of the all-in-one promise. I love Parker Conrad's perspective on building a compound company.

Building moats in enterprise systems is hard. Jerry Chen from Greylock described the three types of enterprise systems back in 2017 really well:

Systems of Record – what happened.

"At the bottom of the stack of systems, is usually a database on top of which an application is built. If the data and app power a critical business function, it becomes a “system of record.” There are three major systems of record in an enterprise: your customers, your employees, and your assets. CRM owns your customers, HCM, owns your employees, and ERP/Financials owns your assets. Generations of companies have been built around owning a system of record and every wave produced a new winner."

Systems of Engagement – what is happening.

"The interfaces between users and the systems of record and can be powerful businesses because they control the end user interactions. In a multi-channel world, owning the system of engagement is most valuable if you control most of the end user engagement or are a cross channel system that reaches users wherever they are. Perhaps the most strategic advantage of being a system of engagement is that you can coexist with several systems of record and collect all the data that passes through your product. Over time you can evolve your engagement position into an actual system of record using all the data you have accumulated."

Systems of Intelligence – making sense of the data from all of it.

"What makes a system of intelligence valuable is that it typically crosses multiple data sets, multiple systems of record. One example is an application that combines web analytics with customer data and social data to predict end user behavior, churn, LTV, or just serve more timely content."

As consolidation of vendors is taking place you can see it happening – systems of record and engagement adding intelligence layers and vice versa.

I might do a post later as it pertains to the revenue stack specifically.

It will be fun to see how this all plays out. Those who are closest to the customer problem(s) will win.