We live in a remarkable age in which there is a growing overlap between technology and other spheres of our life. As a result, there is an enormous number of IT companies emerging all over the world. Just think about it – Google shows more than 300,000,000 results for inquiries like “Software Development Company“! Therefore, the question arises: how to avoid the intense competition in IT sphere?
Fundoodata gives a demonstration of the following information:
Imagine that only in ONE city of Delhi, India there are 1,555 registered custom software development companies.
It is easy to guess that according to the pricing laws, eventually, someone will start dumping. In the world of IT less developed countries tend to embrace dumping the most.
For comparison, let us take data from Clutch, B2B reviews catalog, regarding price levels of custom software development competitors:
Naturally, the important factor is the geographical location of the company. In each country, the standards of living and prices for the services significantly vary. Young IT companies from countries with unstable economies, while entering the global market, have to play on lowering their service prices in order to attract potential customers.
In addition, the price level much depends on the proficiency of the company in the given specialization. That is why price per hour significantly differs from company to company.
So how to attract customers? Surprisingly the answer is not difficult: an IT firm should do something what it is really good at.
How To Choose Specialization for an IT Company
Specialization in economic terms means focusing on one task rather than multiple tasks toward productive output.
Imagine that you need a heart surgery and you’re looking for a doctor. You make a phone call to the clinic and the doctor says: “Yes, I also do a heart surgery. But right now I have 4 appendicitis patients and 2 patients with a toothache. Nevertheless, if you sign up for the next month, I’ll do a heart surgery for you with 15% discount!”
Would you step in?
Unfortunately, many outsourced software development companies forget about this important point: to cut off the wide range of competitors, fit the specific needs of the given industry and maintain a decent hourly rate, an IT company should properly think about its specialization.
When an IT firm is focused on a particular segment, it may come up with more effective marketing campaigns.
Being enough experienced and having a rich portfolio, a custom software development company can set higher prices for its service, thereby getting higher revenue.
So how can it be done? Check if your IT company has already taken its way to specialization.
1. Evaluate market reach i.e. sufficient volume of user inquiries
Simply put, market reach is the estimated number of potential customers it is possible to address through advertising or other promotional activities.
Always keep in mind that a small number of search queries can negatively affect your market entry. It means that the number of your potential customers is limited. Custom software development companies engaged in the development of highly specialized software should consider that fact.
Let’s talk about the tools you can use to evaluate market reach.
Google Trends, for example, is a unique tool where you can search for an average volume index of every keyword matching your potential IT specialization. For example, let us check worldwide searching trends for “banking software development”:
In addition, you can try the B2B Market Sizing Tool, which uses the US Business Census data. With the help of this tool you can evaluate your potential market in less than 3 minutes, using different combinations of industries and employment size.
B2B Market Sizing Tool
2. Consider your experience gained from previous projects
Take a piece of paper and list all the projects your company has completed. Then narrow this list down to at least three specializations and try to choose one.
It may be banking software development, healthcare solutions or something else. Generally, your choice depends on your skills and the competitive environment.
Chetu Healthcare Software Development landing page
Rsystems Banking and Finance Software Development landing page
Sometimes IT companies make mistakes in focusing too hard on their knowledge of specific technologies (like Java or Symfony2) while overlooking customer’s requirements.
Remember that customers are interested in final results and care less about how the results are achieved.
3. Certificates can support your niche skills
You may also have certificates, licenses or diplomas.
For better implementation of your organization’s functionality & improvisation in your existing laid system, it is advisable to go for ISO 9001:2008 certification (Quality Management System – QMS ). The quality standard economizes production and time of your company due to minimum or no rework.
Apart from this, you can go for CMII implementation, which also focuses on improvement of the quality processes at your company.
Certification, by the way, is a helping hand in your fight for the customers as prospects can easily find a custom software development company using certifications related keywords like ISO or CMMI. By the way, if you are looking to enter a certain niche having no hands-on experience, your certificates are better than nothing.
Take a look, for example, at CitiusTech Certificates:
For sure, certification is the best measuring stick when it comes to competence. All other things being equal, a potential customer will choose an outsourced software development company with approved certificates.
4. Analyze the competitive environment and entry barrier
Well, why do you need to analyze your competitors?
On one hand, competitors create certain complexity for entering the market, on the other – the fact of their presence confirms that niche is potentially profitable.
There is a great example of when the competition has helped a small IT company become a world leader. This is an example of Parallels. Parallels released the first program that allows you to run Windows operating system on Apple computers.
Since their program was the first and the only of its kind, it was easy enough for them to enter the market. Then, some big players on the market like VMware became interested in the same niche. They released their product to solve the same problem a year after the release of Parallels software and because of its resources almost immediately took away half of Parallels users. The struggle was long and hard, but thanks to this struggle Parallels has grown several times and improved its product to such a quality that has returned its first customers, and then began to control almost 95 percent of the market niche (Apple users needed to run Windows).
An interesting point is that Parallels product costs $80 while the VMware sells its software at half the price and there are even free analogs on the market. Product quality and excellent marketing allow Parallels to hold the leadership position on its market.
It is much more dangerous when your potential niche is free. In most cases, it means that someone had tried this niche before and he failed. Also, consider the fact that if you have no competitors at all, you do not have anyone to analyze. Entering the market without any data means exposing yourself to unnecessary risk.
For example, if you are developing trading automation software, the competition level is quite low because there is a limited number of brokerage firms all over the globe. Thereafter, market volume is lower.
On the picture listed below, you can see that according to 2015 FINRA Census there are only 3,957 brokerage firms doing business with the US public.
2015 FINRA Census
On the other hand, if the competition level is too high like in WordPress custom development, you will be drowned in even bloodier competition than you probably have now. However, market volume is much bigger here.
Semrush’s Keyword Overview for “wordpress custom development”
Semrush helps spying on competitors’ keywords and backlinks. It also lets you estimate the amount of organic traffic they are getting. Here on ProBlogTricks, you can check a great study on Semrush features.
SimilarWeb is a great analytics tool that shows traffic insights by source. For example, you can discover you competitors’ paid keywords. Check Ginny Marvin’s general review of its capabilities.
Google Keyword Planner is a free tool that provides keyword ideas and helps an IT company build Search Network campaigns in Google AdWords. Check Neil Patel’s awesome review on that keyword tool.
Google Keyword Planner
There is a wide variety of potential niches for a custom software development provider. Proper specialization can be selected based on past experience in particular sorts of projects (sports, government, eco, non-profit, e-commerce, manufacturing, etc.), market reach, entry barrier, economy state of a chosen geo-location and other factors.
A custom software development company can benefit from sticking to specialization as it helps survive and stimulates growth by exiting intense rivalry and justifying higher hourly rates.
Does your company have a specialization? What steps did you take?