Market Segmentation acronyms in the Software market: VSB = Very Small Business

I have a new favourite market segmentation acronym: VSB. It stands for Very Small Business. Zoli Erdo has two excellent articles on this market segment (article 1, article 2). The reason that VSB is now beginning to make sense is directly tied to Long Tail economics: if your production costs are lower, your customer acquisition costs are lower (using search), your sales costs are lower (online payments vs. human-based transactions), your support costs are lower (through really rigorous community planning and self-service), it is now possible to make profit where none could be made before.

It is about time software companies realized that their segmentation efforts are attempts to simplify their environment at the expense of clarity and customer focus. It may only be one more segment but it’s better than nothing. Hopefully we can move to an even more granular model as vendors realize the distinct differences that exist between a 10 person company, a 100 person company, a 500 person company, a 1000 person company, and a 10,000 person company.

It is interesting to note that SAP and Gartner are teaming up for a conference called Small business vision in November 2006. Information can be found here. My guess is that SAP doesn’ t have a hope in hell of selling into the VSB space and will struggle desperately even in the SME space. At least Oracle’s Ellison was smart enough to invest his money in NetSuite so that it could have the bottom of the market and leave Oracle to aim at the high end.