When Off-the-shelf Products You Depend on Shift Gears and Target Enterprise

· 4 min read
When Off-the-shelf Products You Depend on Shift Gears and Target Enterprise

Airtable, a code-free software company once valued at $11.7 billion, has announced layoffs of 27% of its workforce, or 237 people. This is part of a plan to refocus efforts on winning large enterprise clients and controlling spending.

The company had gotten caught up in the hiring spree across tech after the easy-money days following COVID lockdowns in 2021. Most layoffs will impact product and sales teams, targeting and supporting smaller clients.

Now, Airtable aims to consistently secure customers spending over $1 million rather than supporting numerous smaller accounts spending just $10,000. This comes after an earlier round of layoffs in December 2022 that cut 254 jobs.

Streaming Services Raise Prices, Reduce Content

Here’s another situation in the video streaming industry that is similar. Streaming services focused more on growth than revenue in the past several years. But we’re entering a new phase in the industry cycle where companies are starting to care more about profits than growth.

This shift is likely the primary reason behind the recent layoffs across the tech sector, including Airtable. It’s no longer sustainable for businesses to maintain large salaried workforces, so they optimize costs and shift models. This includes making their top performers even more productive with AI and other technologies.

In a recent Gizmodo article, Warner Bros. Discovery’s CFO, Gunnar Wiedenfels, expressed a similar perspective. He believes streaming prices have been too low and must rise to fair market value. Wiedenfels argues that some content must disappear and that viewers must accept this reality.

Specifically, he suggests increasing prices would reduce subscriber churn, especially if the company can get more people to commit to annual plans. Wiedenfels also proposes offering ad-supported streaming tiers to boost revenues.

History Repeats Itself for Startups Targeting Enterprise

This pattern has been repeated in tech for decades. The primary goal for a startup initially is growth — attracting as many users every month and year as possible. A new business can’t do so other than targeting SMBs — there are many more of them, they are typically more risk-tolerant, and there are more early adopters among them.

However, the focus shifts once the company reaches a particular stage. Now, the enormous user base becomes a liability rather than an asset, and companies focus on the subset of users that pays more. It’s a natural process for any business — you establish a name for yourself and then go where the money is.

A few more examples from the past

Salesforce was initially launched as a CRM solution for small businesses. However, they shifted the focus to enterprise clients in the early 2000s. This move allowed the company to target larger organizations with more complex needs and higher budgets, leading to significant growth and success.

Similarly, HubSpot was initially positioned as an inbound marketing platform for small and medium-sized businesses (SMBs). HubSpot shifted its offerings to focus on enterprise-level solutions after a while. This shift enabled the company to focus on a more profitable subset of customers.

Box.com focused initially on providing file storage and sharing services for individuals and SMBs. But Box shifted its focus to enterprise clients in the early 2010s. This move allowed the company to compete with more significant players in the market and offer more robust solutions for businesses.

Finally, although Slack initially gained popularity among small teams and startups, it shifted its focus to enterprise clients. This move involved developing additional features and integrations to meet the needs of larger organizations, ultimately leading to its acquisition by Salesforce in 2020.

Implications for Businesses Relying on Third-Party Tools

When choosing an internal tools strategy for your company, these dynamics are fundamental to understand. I’ll emphasize it repeatedly: the off-the-shelf product you want to use, whether a SaaS or no-code tool, is its own stand-alone company. Like a partner in a relationship, it will change over time, and you can’t control that evolution.

Of course, this complicates things. You have to plan for today and potential future challenges if the 3rd-party app you rely on pivots strategically.

This doesn’t mean you should avoid 3rd-party tools or off-the-shelf products entirely. But it would be best if you implemented them thoughtfully. Basing your whole business on a platform like Airtable could put you in a precarious position. Then again, maybe not.

Companies are run by people who make different decisions in different contexts. For instance, the no-code automation tool Make gave users about 18 months to transition away from its platform. SalesforceIQ (formerly RelateIQ) allowed two years before sunsetting its product. Facebook granted one year for its users to migrate their Parse.com apps elsewhere.

The 12-to-24-month timeframes are generous on the surface, providing ample time to prepare and migrate. But if you’re unprepared, it’s still an incredibly stressful process. With only a year’s notice, you may spend 3–6 months deciding on and preparing for a replacement and finding extra resources before having just 6 months for the transition. That’s a little runway when you must maintain ongoing operations and pull off a massive migration simultaneously.

To safeguard your business, it’s essential to avoid making your whole business fully dependent on a third-party product. Having your own process to sync the data from 3rd-party products is the least you can do. It helps avoid the pain of exporting it from another product, which can sometimes be impossible in the format you need. You also have to keep track of the announcements made by the products you use. My personal red flags are decisions to focus on enterprise or acquisitions. That’s when I start preparing for the worst in the next few years.

Originally published on Medium.com