Companies need to be aware of
technological trends and advancements that can secure their positions in the
market or to push them ahead in the competition. Losing sight of advancements
in related fields that can eventually affect their industry can be costly to
established firms. Also, the incumbent firms, however big they are, are
susceptible to losing to a competition unless they pace themselves in the right
direction.
Until 2000, there was no cloud-based
solution in the market for ERP for CRM. This was a time when Oracle and SAP
were the leaders in the CRM segment with their on-premise solutions. However,
Salesforce, a new entrant in this segment disrupted the market with its “24/7
available- SaaS” ideology. It gained consumer-side force by advertising its
advantages over the existing on-premise solutions. They also planned to make
cloud-based applications customizable, to gain competitive advantage over the
current leaders at the time. In 2007, Salesforce introduced its cloud-based
CRM. They identified that they should target “Sales” teams that focus on
immediate results, and since their tool did not require any set up, they could
offer their product for free for first five customers at a firm without loss.
They used this as their distribution channel, encouraging other people who
heard about this product t use it as well, thus spreading the tool. By 2015,
Salesforce has 19.7% market share in CRM.
Oracle and SAP realized how cloud is
taking over their positions in the market, while they were fighting each other
with their on-premise solutions. These competitors also quickly followed the
trend, as SAP is now the biggest competitor for Salesforce CRM.
However, SAP recognized that
cloud-disruption is not limited to CRM, and swiftly turned its eye on
cloud-based ERP solution. This strategy can be seen as the company’s plan to
defend its market position in the ERP segment by anticipating changes in the
ERP industry. This follows trends in CRM that was established by Salesforce.
Currently, SAP hold 25% of ERP market share, followed by Oracle with 13%.
These developments in CRM and ERP
segments are an indication of how technology changes are disrupting major
players in the industry and how these organizations can ward off newcomers by
anticipating such changes. The market leaders need to watch out for disruptions
in other related fields that can possibly encroach their market segments. To
stay relevant for many years to come, the leaders need to be aware of long-term
changes that might have to happen based off the current trends. Being prepared
for uncertainties and change, while encouraging R&D to stay ahead in
quality of service, and continuous market analysis and forecast are most vital
for sustainability of market leaders.
References:
Michael E.
Porter, “How Competitive Forces Shape Strategy”, Harvard Business Review,
March-April 1979
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