Reflections: Platform Vs. Point BoB In Enterprise Tech
Summary
- The debate between focused startups and compounded startups in the enterprise tech industry continues, with differing views among investors.
- Focused startups argue that specialization and excellence in one area is key to competitive edge and survival.
- Compounded startups believe that creating a platform of interdependent solutions can provide better performance, user experience, and total cost of ownership.
Focused vs. Compounded
During 2021-22, internally, with clients, and with fellow analysts, we debated the merits and drawbacks of enterprise tech startups being focused on a single point solution versus being aggressive in expanding into a broad platform. Articles we read and videos we watched, also indicated substantial bifurcated views across the investment community.
At the time, as the typical enterprise had accumulated hundreds of SaaS applications, and in general, enterprise software had become so fragmented, we felt that a good dose of consolidation was inevitable at some point in the not-too-distant future. In this YouTube video we showed how industries swing from consolidation to fragmentation and back again, as customers switch back and forth from wanting innovation to wanting simplicity, and vendors aim to constantly seek new ways to create value. In that video we specifically discussed the SaaS fragmentation and what that meant for the future of enterprise software.
This evolved into the topic of comparing focused startups to compounded startups, where we published a short piece in May 2022. At the time, a compounded startup was a very new term, defining a startup that, from the outset, was aiming to create a platform of interdependent and synergistic solutions.
In this report, we will revisit the comparison and share our updated thoughts.
