Where Next For Differentiation In The DAM Software Market?
In the previous article today, we covered Widen’s release of their SmartImage ‘DAM Lite’ system and yesterday, the update to Portfolio from Extensis. I would not want to do a direct comparison between SmartImage and Portfolio since I’m just basing this on some press and web pages, but an impression you might gain from just looking at the marketing communications output of vendors is that these two ‘Lite’ and ‘Full’ market segments are hinting at a long-term convergence trend. I am not sure what ultimate destination that is heading in, but it does mean that anyone not actively developing and enhancing their platforms who is failing to keep up with the pace might start to find their market share eroded by the ‘lite’ end of the market as enough end users decide that a cheaper alternative is good enough and may include all the functionality they need anyway. The firms that develop ‘lite’ products are also at possible risk of starting to compete with themselves, if they offer both options and they cannot maintain a sufficient level of differentiation between the two.
The question then becomes what kind of differentiation? Although poor customer service is a sure way to lose business, I don’t think it really has much clout for acquiring it as support and service is the kind of issue you only care about when something goes wrong (and few people buy products of any description with an expectation that they will fail). Two other obvious factors are price and features.
Although it’s a rule that frequently gets broken, most operators are well aware that price competition is a rocky road to follow and the short term benefit it generates in the form of increased sales leads is rapidly cancelled out by lost profits and reduced opportunity to invest to compete in a more sustainable fashion. I can foresee the DAM market coming under greater margin pressure than it has recently which will prompt some to hit the panic button and slash prices, but wiser solution providers will want to find something else that allows them to stand out from the crowd. So, realistically, you can strike price off the list as a practical differentiation point for anyone that intends to remain in the DAM software game for an extended period of time.
Moving to features, the rate of innovation in DAM software is clearly slowing down currently. I get quite a few DAM vendor marketing people who want to take issue when we describe their latest update as being ‘minor’ or ‘maintenance in nature’ etc. Having developed software myself, I can relate to their pain since implementation of any complex application is both time consuming and intellectually demanding. While I might be able to appreciate the effort involved, the people who could potentially buy their products, however, are rather more indifferent to their plight – especially when there are numerous other alternatives available, all of them saying much the same as each other. Many end users seem distinctly under-whelmed by vendors trumpeting something like ‘faster search performance’ and similar phrases.
In many ways, features are a bit like the software equivalent of academic qualifications; you do need them to apply for most jobs, but merely possessing them is not sufficient to get selected (or even invited for an interview). Although DAM innovation hasn’t stopped and there are numerous unexplored options for optimising DAM applications, the big headline-grabbing opportunities to differentiate products are getting harder to find and becoming more niche and specialist (the equivalent of the post-graduate degree or doctoral thesis to link this back to my previous metaphor). So, differentiation based on features alone is now becoming more difficult to make interesting and relevant for a wide enough sample of prospective end users.
There is one more option: interoperability and the capability for one DAM system to interact with many other solutions, including potentially competing DAM products. This is a hybrid differentiator between technical features and product branding/awareness (if the vendor’s marketing people are able to both recognise and use it appropriately). The more connected DAM applications are, the wider the range of uses they can be applied to. The effect of this integration activity is that more end users come into contact with a given software product – and is where the branding opportunity presents itself.
As most vendors will be aware, the beginning of the end of their time with a given client is when their system gets abandoned and they don’t hear very much from them any longer. This is usually the point at which corporate bean counters begin to ask why they are paying annual service fees to keep a system going and whether cheaper or better alternatives are on offer (or even to just scrap the whole idea). Interoperability reduces the chances of that happening and weaves the application further into the fabric of a given organisation. It also means being embedded into the marketing communications output of all the related third parties a vendor has decided to partner with, since partnership pacts and treaties are usually accompanied with press releases and other fanfare which persist for many years after the original announcement and get updated periodically etc.
If there is going to be a market consolidation in DAM, the existing well-known names cannot trade on that advantage alone indefinitely – especially if some competitors are going to experiment with aggressive pricing tactics (at least for a short period). They will need to bolster their offer with improved integration across a larger number of partners. Similarly, less currently well-known application brands still have the opportunity to get in on the act and claim a foothold from which it is harder for them to be usurped and which they can use to extend brand awareness.
Users will increasingly want multiple products to work together as though they were as single cohesive unit. I don’t accept that CXM is a credible software classification, but it is a plausible business strategy and organisations will want to be able to realise CXM business objectives by selectively combining multiple products together in a way that might be entirely unique for them. Those DAM platforms that can offer that level of flexibility and integrated brand awareness will be in-demand and are likely to benefit at the expense of those who are not.
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I share your concern about the “where does this lead?” aspect of DAM lite. When your target is a price conscious department whose budget might not be set in stone, and whose expectations will continue to rise as they see competing products leapfrog one another, you have a volatile business model that requires economies of scale to survive. However, as this space becomes increasingly splintered, it’s tough to see anyone gaining any serious traction.
Meanwhile, developers, managers, marketers and everyone else need to be paid. And the most talented among them will demand the highest compensation. Some vendors are likely relying on their more costly “full” DAM systems to pay those bills; but then your point about differentiation becomes quite real.
As the lower end product must improve itself to remain competitive at the lower end, what does the upper end product do? I’ve said it before, and I’ll say it again here: No DAM vendor in our industry is large enough to sustain more than one DAM product. Hell, even Adobe had trouble making three desktop publishing tools work, and there *was* some differentiation there, and limited external competition. Contrast that to what we see in the DAM space, and I think it’s easy to see why so many would-be DAM purchasers become overwhelmed with confusion. (Does anyone yet see the natural line of division between North Plains’ various acquisitions?)
Fact: A company comes up with a finite set of ideas, and not all of them will be good. So when that company has to divvy up those ideas across similar products in the name of differentiation and establishing value, some customers are going to be held back with regard to potential. Anyone who remembers buying a new car knows that feeling of not being able to get the leather gear shift unless you buy the model with the turbocharger.
Of course, companies can always argue that those target markets are different and that they’re each getting exactly what they need. But in my experience in this industry, the needs and expectations of a small work group can often surpass those of a multinational enterprise. The notion that DAM lite will be “good enough” for these smaller organizations is laughable. Give these users time; they’ll start getting hungry for more. But by then, they’ll be locked into these “lite” accounts, none of which, as far as I know, can be upgraded to a full DAM.
I applaud Extensis for updating Portfolio. They recognized they had one of the industry’s remaining dinosaur DAMs and they decided to do something about it rather than abandon it and their users. Canto introduced something entirely new to address their DAM’s geriatric status, which calls into question what will become of Cumulus in the long run. And Widen already had a reasonable DAM before they ever started messing with this SmartImage thing. So I have no idea what the hell they were thinking. Why not just make that DAM do what this “lite” target market wanted?
My best guess is that this all about marketing. We DAM marketers know that the term “digital asset management” doesn’t resonate with many, and Google Trends show it losing popularity over time. So the terms “brand management” and “customer portals” or whatever you want to pretend DAM is, seem more appealing—especially for those new to this industry who don’t yet know what’s going on.
But marketing does no DAM user any good when she’s trying to get work done. I’m happy working for a one-product company because every conversation we have, every idea we come up with, and every partnership we enter in to, is about making things better for all of our customers, not just some of them.
David Diamond
Director of Global Marketing
Picturepark