As the new generation of cloud businesses like Facebook rushed into the public eye, they hit hundreds of millions of users before a key realisation began to emerge. If you aren’t paying for them, the reality is that you’re probably the product.
It has always worked a little differently in the enterprise. Looking at a traditional example like Microsoft Office, not only do you pay to use the software but, because of proprietary standards, so do the companies you work with who need to open the documents.
With that in mind, creators of enterprise software have always had a tendency to give the biggest companies a deal they couldn’t refuse, with the interest of making them a platform to sell that software to all their business partners. That’s the business model - that’s where the bulk of the revenue comes from.
But is this still okay today? If you’re a large enterprise, you’re ultimately one of the biggest nodes shaping the standards of the future. Except these days it’s not just about what tools you use to create text documents and spreadsheets.
As more and more documents become primarily electronic, especially those with financial purposes like invoices, today’s enterprises are not just laying down the foundations of software paradigms but potentially the very economic fabric that unites the world.
Because when it comes to finance, the smaller businesses probably have no choice but to deal with the organisation through this new tool, so the provider of the software suddenly has a captive audience. And out goes the swarm of a couple of hundred sales guys.
If those businesses actually want to get paid in a reasonable timeframe now, they have to pay for the new service, disrupt their workflows to login via a new portal and duplicate this for the incompatible solutions other businesses they work with insist on. When you apply this old enterprise sales dynamic to the new areas that it’s reaching into, it’s a whole different ball game.
So is this really what you want to inflict upon your business partners? The times are changing. Vendor lock-in used to be a massive threat when you were dealing with the compatibility of data but now you’re talking about direct impact on things like cash flow.
What price are you willing to charge these trading partners for working with you? There’s always another way.
Posted by Christian Lanng, CEO, Tradeshift
Christian Lanng is one of the co-founders of Tradeshift, a platform for all your business interactions that helps companies run more efficiently by harnessing the power of their network to create new value from old processes like invoicing, payments and workflow.