More Thoughts on “Enterprise Software’s Youth Drain”

I was reading this really interesting post on GigaOm about how young people aren’t going into enterprise software anymore. My initial thoughts are that enterprise software feels like trucking or transportation – lots of revenue but limited growth opportunities. Some of the reasons that younger folks are deserting enterprise software can be chalked up to the impatience of youth. Others can be chalked up to the perceived growth prospects for the industry.

The traditional packaged enterprise software industry doesn’t feel like a high growth area. It’s large, but not so dynamic. Enterprise software is definitely a really large industry. However, with Oracle, SAP, and Microsoft buying up almost every category-leading vendor out there, the industry feels like it’s a large behemoth with limited growth opportunities. Aside from SaaS and open source, there aren’t a lot of areas of software that look attractive to new folks in technology. On the flipside, consumer-facing web companies are not nearly as large (in terms of profit potential), but appear to offer much better growth prospects.

The nature of the sales and product development process tends to keep younger people in the background. Most traditional enterprise software companies, save those who are targeting mid-market or SMB customers, tend to sell to senior executives at Global 2000 companies. The folks to whom these software companies sell tend to be senior executives and well, older in general. I’ve certainly seen software companies who want to send sales, marketing, and product folks whose age and experience profiles more closely match those of their target customers. As such, it means that many younger people end up having to “pay their dues” in the background before they get additional levels of customer-facing exposure. Contrast this with the latest wave of web 2.0 companies, many of which feature people in their early 20s in leadership positions. Without the need to sell directly to customers who are senior executives, it’s not as necessary to have “grey hairs” in visible roles on the team.

Enterprise software companies have really long product cycles, whether it’s initial development or future revisions. I don’t know a lot of enterprise software companies who release more than one major upgrade of their core product with a frequency greater than every 12-18 months. For someone who’s eager to get feedback about what they’re working on and get experience with the product launch process, that’s a long time to wait. You’ll basically need 3-4 years to see a few revs. You’ll learn a lot in that time, but it’s a long time to wait. There are lots of web companies who launch new revisions to their core platform in a near constant basis. This offers a young person many more opportunities to see the launch process in action in a fairly short period of time.

It’s hard to start an enterprise software company until you understand enterprise customers. Simply put, I’m not sure how you develop a CRM software solution, the next generation security application, or the next financial application unless you’ve gotten to understand the basic needs of these customers. As such, I’m not sure how many college students or young folks in the industry have this kind of insight until they’ve been in the industry. And if you don’t enter, then how will you learn these things? Again, many of the folks in the web 2.0 space are building apps to solve problems they understand where they are part of the core customer segment.

Enterprise software companies are a great place to learn how sales, product development, and marketing all work together. Despite all of the many issues identified above, enterprise software offers a much better place to learn the business of software (or just business in general, for that matter) than most web 2.0 customers. In enterprise software, you learn a lot – you can learn a lot about how the direct and channel sales processes works (which is largely absent in most web 2.0 companies), how to manage a longer-run product development process that involves direct interaction with existing and prospective customers, and how more traditional marketing (product and corporate) can help drive effectiveness in software. The interplay of development, sales, and marketing in an enterprise software company can teach a young person quite a bit about how business works and how these three forces need to balance each other. Oh, and let’s not gloss over the fact that enterprise software tends to generate cash and lots of it – nothing like having your performance and

For all of the downsides of working in enterprise software, I think the current generation of web 2.0 entrepreneurs could benefit from some of the hard-learned lessons from a career in enterprise software.