Why are you still building consumer apps? Enterprise pays 4x more!

Consumer apps are the focus for all the excitement and media attention in the industry. Enterprise software is dull and boring, right? Not if you care about making money! Our data shows enterprise developers generate 4 times as much revenue as those targeting consumers. Besides, what’s so dreary about reinventing the way people work in a mobile and connected world?

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“Wait”, I hear you cry, “what about BYOD and the consumerization of IT? Surely the future is all about selling computing tools directly to professionals?” Well the data from our April-May 2013 Developer Economics survey says that future isn’t here yet. In any case, if you’re going to collaborate with colleagues then you all need to be using the same tools, so most of the time the company still has to choose and buy them.

We asked developers which type of customer they primarily targeted from a selection of Consumers, Professionals, Enterprises, Other and Not Sure. Using this data we can compare the fortunes of developers serving each of those audiences.

It’s entirely natural that a new consumer-focussed computing market for smartphones and tablets spawned a large industry of consumer focussed app development organisations. The market is rapidly maturing now, with smartphone penetration above 50% in all developed markets and tablet adoption not far behind, yet still almost 75% of companies involved in app development are focussed on consumer apps. Traditionally software spending has been much higher in enterprises and although there is a shift towards employees selecting their own technology and tools it is surely not happening as fast as the shift to mobile computing. This leaves a gap in the market for developers focussed on apps for the mobile enterprise to fill.

A little over 12% of the money-making developers in our survey were targeting the enterprise yet they made on average almost 4 times as much revenue (per person involved in development) as those targeting consumers and typically had more than 4 times as many people involved in app development. Developers targeting professional users rather than their companies only made about 50% more revenue per person than consumer focussed developers and had about twice as many people involved in development. So, while this is a promising market, independent app developers are not replacing the enterprise IT department just yet.

At the bottom of the revenue pile it’s no big shock to see that developers who aren’t sure about their target market make by far the least money. How do you build a great product without knowing who it’s for? The small number of respondents who felt their audience didn’t fit one of our categories, selecting “Other”, may possibly be targeting too small a niche since their revenues are not far above half those of developers building consumer apps.

It’s important not to get confused by the similarity of the increased development team size and higher revenue figures – the chart shows revenue per person, so the effect multiplies. That is, the average enterprise focussed app development organisation is making around 16 times as much revenue as the average consumer focussed one in total. That makes the total revenues of the enterprise developers significantly greater than those of the consumer developers, even though there are around 6 times as many of the latter. Averages hide a lot of detail though. You don’t have to build a large company to be extremely profitable in the enterprise mobility market – smaller development teams actually have much higher revenues per developer. More details on that and important differences between consumer and enterprise app developers will be the subject of a future post.

Agree with our figures or disagree? Drop us a comment.

- Mark (@__MarkW__ )

Author: Mark Wilcox

Mark is developer who has worked on everything from the lowest level smartphone firmware to games and apps that sell pizza. He's also a project leader with a focus on lean methods and a consultant who loves rapid prototyping, app economics and business models.

  • Barrett Sonntag

    Any tips on how to court enterprise clients? Seems like that is the largest barrier to entry, just knowing who to talk to.

    • md

      Office Marketplace could be a good start

    • markwilcox

      Really depends on what sort of product you’re selling. Anything from having a consumer version or direct marketed freemium offer, to stalking decision makers on LinkedIn and good old fashioned face-to-face networking.

  • Randolph

    ““Wait”, I hear you cry, “what about BYOD and the consumerization of IT? Surely the future is all about selling computing tools directly to professionals?” Well the data from ourApril-May 2013 Developer Economics survey says that future isn’t here yet.”

    By that same logic, 0% of enterprises are currently buying the enterprise product that I’m going to build. Either way, I’m going to have to change somebody’s buying habits to make money from them. Keep using “the future isn’t here” as an excuse not to do something, and you won’t do anything — selling a new product to anyone is changing the future.

    “In any case, if you’re going to collaborate with colleagues then you all need to be using the same tools, so most of the time the company still has to choose and buy them.”

    Or you have to sell a tool that is useful on its own, without requiring all of your colleagues using it first (the doomed, so-called “boil the ocean” strategy). You can’t get an enterprise to switch to a new database system by selling to one employee at a time, but every enterprise cares about Twitter today and it was because they realized that each person was using it individually already. What you call “in any case” is only the case for a very specific type of enterprise-only software.

    “Our data shows enterprise developers generate 4 times as much revenue as those targeting consumers”

    That’s not at all surprising, since selling to enterprise customers requires much higher *expenses*, but how do profits compare? It’s very interesting that you chose never to mention them — or the number of non-developer team members typically required to make enterprise sales. Every enterprise shop I’ve worked in had 4x the number of people working sales and marketing and support and legal as it did developers. Show us graphs of “*Total* Employees by Audience”, and “Average *Profits* per Employee by Audience”. I suspect that when the graphs show the complete picture, they will look much less favorable to enterprise sales.

    • markwilcox

      >> Well the data from ourApril-May 2013 Developer Economics survey says that future isn’t here yet.

      By this I simply meant that traditional direct B2B sales is far from dead, it’s making more than direct to professionals.

      >> without requiring all of your colleagues using it first (the doomed, so-called “boil the ocean” strategy)

      There’s a lot of middle ground between selling to individuals and converting the whole company. Most modern enterprise products can be adopted by a department, a team, or just a single project. Having a consumer offering and getting your users cross-selling into the enterprise for you is smart – e.g. GitHub.

      >> What you call “in any case” is only the case for a very specific type of enterprise-only software.

      Given the rather more broad scope of “enterprise software” I’ve just discussed, I think this is true for almost all software that involves collaboration. When I say “chosen by the company”, I really just mean by anyone within the company with sufficient authority to do so for the scope of usage. We’re not talking about the traditional enterprise sales cycle here with sign-off at board level. I actually thought the likes of 37signals had evolved the definition of enterprise software a long time ago.

      >> That’s not at all surprising, since selling to enterprise customers requires much higher *expenses*, but how do profits compare? It’s very interesting that you chose never to mention them

      We don’t have that data, so I had no choice. We did ask about profitability in the latest survey though, so hopefully we can address that point early next year.

      >> or the number of non-developer team members typically required to make enterprise sales

      You’re still in the old enterprise model here. Our data on company size is too coarse grained to do graphs like the above, plus the presence of giant companies (10k+ employees) with a small team making apps (we only asked for revenue associated with the apps) makes the mean average meaningless. However, there are clearly more non-developers involved in an enterprise software company – the median consumer app company is 2-5 people, while for enterprise it’s 6-20 people.

      I’m not at all convinced that it’s cheaper to acquire a large paying audience in the consumer space but we really don’t have any good data to base the argument on there.

      Hope that helps clear up what the data in the article is saying.

  • Doug Lee

    surely you must grasp that not developers are financially driven

    • markwilcox

      Assuming you meant to say “not all developers”, of course – we also have the data that shows what developers main motivations are (we asked directly) – only just over half of developers are motivated by revenues at all. However, this subset of the data was specifically looking at those trying to make some money, so I think it’s fair to compare.

  • http://cirrus.twiddles.com/ James Nash

    For better or for worse, big organisations seem to prefer sourcing technology from established “enterprise” software suppliers like SAP, Oracle, Microsoft etc. I’m not convinced such suppliers always offer the best technology for the job or the best value for money, but nonetheless these companies are trusted by many big organisations and will often be their first port of call. It’s the old “Nobody ever got fired for buying IBM” kind of mentality that still persists.

    Directly competing with these big tech companies in the enterprise space is therefore hard for smaller businesses that are not already established in those circles. Similarly being a shop that builds solutions on top of SAP, Oracle, MS or whatever is likely to be more costly than being able to use cheaper or free alternatives. You need to get access to all their stuff in order to learn it. Also, they tend to have (paid-for, of course) certifications programs for developers. It all adds up to some considerable barriers to entry.

    I’m not saying don’t try. The crusty old enterprise world sorely needs some fresh, new players to shake things up! However, tread carefully.

    • markwilcox

      Hi James – the most common misconception I’m seeing about this article is that it’s primarily talking about “enterprise” software of the sort the giant vendors provide and selling into large enterprises exclusively. Enterprises come in all sizes and includes things like schools, local government and non-profit organisations as well as businesses. Our survey didn’t say “are you building enterprise software products” it asked if you primarily sold to consumers, professionals or enterprises. Judging by the range of sizes of respondents selling to enterprises, it wasn’t badly misunderstood. Possibly it’s better to use the term B2B but that excludes other customer organisations that aren’t businesses. Just because early in the industry only large enterprises could afford customised software doesn’t mean we should be stuck with that meaning for the term forever. :)

      • http://cirrus.twiddles.com/ James Nash

        Thanks for clarifying. “Enterprise” has become a somewhat overloaded term unfortunately.
        As you correctly guessed, my earlier comment was specifically about large enterprises, like big companies or governments.

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  • pingpalfred

    I think most comments are missing the point. “We can’t sell anything ’cause enterprise only buys from large suppliers like Oracle, SAP, etc”. Tell that to the PaaS like SalesForce or pingpal.io. If you think that “Enterprise” is the same as GM et al you are leaving out 80% of the market, the SMEs!

    • markwilcox

      Nice plug. :)
      You are 100% correct though – I think this comes down to the popular perception of “Enterprise Software” as on-premise highly customised software for giant sized enterprises. I think that view belongs to relatively ancient history in tech terms but it’s still widely held.

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  • Rick Alexander

    Interesting article and comments. The Enterprise world will see the light eventually, and realize that they don’t need to have the Big Boys developing apps for them. Some of the best ideas are from small companies because they are not entrench in large corporate thinking. Innovation is started with small ideas. The problem with small companies is they don’t put enough time in the business process, the discovery, the creative session. They have to figure a way to be better business people with insight into the process of what they are trying to make an app for. When they do that then and only then will small developers be able to go into the enterprise world.

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