New Market Winners

How do you know which new products will race ahead and which willlinger at the starting gate? Guy Clapperton studies past form and offerssome tips

Right, I've got this product I'd like to sell you. It's ... well, it's a new concept. It's ... no, it's not really a database, because it's got online elements and scheduling and stuff as well. Email? Yes, it'll do email, but there's a lot more to it than that. No, you wouldn't call it workflow because it has this database and ... I really think this will be worth writing about.

So ran a conversation, more or less, I had with Lotus a few years ago at the time of the launch of Notes. Now we take the product for granted, but at the time nobody was quite certain. Lotus, the 1-2-3 company, was doing something different - but it was so different that it took a while before anyone knew what it was talking about.

Lotus was experiencing the same difficulty that anyone with a new product category faces. Whoever invented the first wordprocessor and had to persuade typewriter users that it was worth using must have been in a similar position, and we won't even talk about the poor sap who had to explain what a relational database was to people who had never realised they needed such a thing.

It's difficult to create a new market. Tandon co-founder Chuck Peddle tried it a few years ago with a company called THSTyme, saying he had something that was going to knock the PC off its pedestal permanently and no mistake. Four years later we are still waiting. Meanwhile, avid proponents of the network computer (NC) claim it's about to take off into the stratosphere.

There are at least precedents for the NC, because it's largely a dumb terminal with a few extra bells and whistles. Even so, it may or may not work - and if it doesn't, it will take a number of resellers down with it.

Currently, the smart money is on co-operative enterprise management solutions (Cems) or applications management, as one of the next big things.

That is as long as the smart money is coming from research company the Aberdeen Group.

Peter Kastner, VP for software research at Aberdeen Group, says Cems and its chief UK proponent, BMC Software, are the things to watch.

The problem is, as he and BMC agreed, if a reseller goes in and tells someone they can offer a co-operative enterprise management solution, the reply is likely to be along the lines of a flippant 'unleaded or four-star?'

Lotus recalls the problem only too well. Product manager Jim Moffatt was in the groupware arena years before anyone was really recognising the product category as an entity of any description. 'Originally the products were designed for use in specific companies,' he says. 'Then we went into other companies with similar businesses and said, look what these others are doing.'

This reference site approach is the one adopted by BMC for Patrol, its application management product.

The product provides integrated application management for distributed systems. It monitors databases, applications and other resources and reports problems. Patrol uses knowledge modules, loadable libraries of application management information, and intelligent agents to achieve its ends.

If that sounds straightforward to a computer-literate audience, it is worth considering that not every potential customer is as well-informed.

To a board member who has to decide whether or not to buy a product, it could all too easily appear that the system is set up to serve the computer and its infrastructure rather than the bottom-line profit area. This makes people reluctant to spend their money.

BMC marketing manager Andy Smith says the concept came up from the company's background in high-value systems for large organisations with mainframe backgrounds.

'The whole concept is aimed at only the top five per cent to six per cent of UK organisations, and that is where we put most of our marketing effort,' says Smith.

'We talk to the press a lot and talk through issues surrounding applications.'

The problem with this approach, however, is that it is difficult to measure its success or failure. Smith says: 'You can't cost-justify it before you do it. You can never be certain whether a decision-maker will be reading.

It's an act of faith in many ways.'

There are other approaches. As Smith points out, direct mail is one which allows the mailshotter to measure its success by tracking a sale to its conclusion. Taking a horizontal rather than a niche approach is another, says Moffatt, although it is a lot more long-winded.

'That is when you look for people in similar sorts of business but not in the same industry necessarily,' says Smith. 'If you want to go that route you need a product that has instant appeal, but even then you need a number of pioneers who will evangelise the product and act as a purchasing mechanism.'

The salesforce can be internal or external, he suggests. Lotus' best argument for Notes in the early days was that people had used it to improve their business: in effect, the reference sites acted as sellers themselves.

Without payment, too, which must have been nice.

The bottom line is whether people will buy a new product for a new category.

Moffat concedes that the success of Lotus Notes was in no small way helped by the fact that it runs on PCs and nothing proprietary. 'People already had PCs,' he says. 'You can't do anything too radical.'

If certain predictions about the intranet come to pass, conformance with existing technology will become even more important if a product is to gain any ground. At the same time, an existing hardware platform is no guarantee of success, as any members of the sales team for Lotus 1-2-3 for the Mac will tell you - wherever they may be by now.

And the market analysts are ruthless when they talk about what the next big things are going to be.

Kastner says applications management is a growth area to watch for, but he gives the other great hope of the day, the NC, short shrift.

'It is mostly overhyped,' he comments. 'People will not want their autonomy taken away in every business context, and there is a lot of oversimplification going on about its applicability in more or less every business situation.'

Ironically, Kastner identifies the Internet as underhyped, if such a thing were possible. 'It is going to change people's lives, but expecting it to do so within three years of becoming popular is too soon,' he says.

The area to watch for the next killer application to appear, he suggests, will be Internet commerce. When someone builds the right application, and the market is confident that it will work and be secure, they will make a fortune. The issue for the reseller will be identifying the right Internet commerce product, and goodness knows enough of the things are in development.

Of course, fundamentally the absence of any market is usually the resellers' fault - ask any exasperated marketeer. But you knew that.

A duff market is always the reseller's fault, or at least it's the reseller whose business goes to the wall if the marketing fails to take off.

This can make the dealer's position seem very vulnerable when new categories are being established, and there is no surefire trick to telling the real opportunities apart from the also-rans. It would be an interesting exercise to see to what extent Kastner's predictions about the Internet are borne out by 2000. If he is right, fine. If not, a number of organisations will have suffered through heeding his advice.

Not all resellers see themselves as marketeers as well as sales-based businesses. The fulfilment reseller is not likely to want to be involved in selling anything for which there is not already some sort of demand, and although the margins on established commodities is not large, the feeling of safety in standing by a solid rather than an inspired business is often worth having.

More interesting for the Lotuses and BMCs of this world is the consultant who knows a client's business thoroughly and can spot an appropriate situation for their particular product at a glance.

Moffat says: 'When a dealer understands the specific needs of his client they can propose a solution,' he says. 'They are then not selling technology but solving a problem.'

It's harder work and a far higher business risk than standard PC selling, but potentially more rewarding. Looking at the margins left in the fulfilment business it could soon be the only way to continue.