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Software

Why the marketing space is vital to enterprise software players

This is a contributed piece by Julie Langley, partner at Results International

The enterprise software players should really have little interest in the world of marketing services, or so you might imagine. After all, their business is selling software, which is high gross margin and highly scalable. They have always shied away from selling services, which can only be scaled by adding more people. As such, any services they have offered have generally been seen as a necessary evil to ensure software sales. However, as technology starts to replace services in the marketing function an ever-greater proportion of the marketing budget becomes accessible to companies such as SAP, Oracle and Salesforce and they have this firmly in their sights.

 

Why has the threat from enterprise players been ignored?

Despite the software vendors devoting significant M&A spend to the marketing sector in recent years (through acquisitions of marketing technology), the incumbents such as WPP, Omnicom, IPG and Dentsu, don’t yet seem to view these players as a particular threat. They are, understandably, more concerned with their most immediate challenges - the impact of Google, Facebook and Amazon on their business model, the impact of fraud and lack of transparency on advertiser spending.

Meanwhile, remaining concerns have largely been focused on the high profile incursions into the marketing sphere by the management consultancies. This is not without merit – the consultancies’ revenues in the sector are growing, and they are often bidding against the large media holding companies for the same acquisition targets. They also appear to generate higher revenues per head in marketing services than most of the large media holding companies.

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