Identifying Competitive Advantage in the Software Industry

In the feasibility analysis of any new business venture, one of the first tasks is to evaluate your strengths and weaknesses compared to competitors in the marketplace. A useful tool for this task is the S.W.O.T. analysis: Strengths, Weaknesses, Opportunities and Threats. Laid out like a four-square grid (see below), it helps to identify and clarify your strengths and weaknesses, as well as threats and opportunities, compared to those of your competitors.

As an example, let’s look at backup and disaster recovery developer, Paragon Software. In the SWOT matrix below, Paragon is compared with its larger, investor-funded competitors. The matrix shows that while we cannot compete in building brand awareness quickly utilizing resources such as advertising due to a lack of outside funding, we can compete by winning new customers from the competition via better customer service, a higher-quality product, and competitive pricing. By examining the strengths and opportunities squares a clear picture of how to position ourselves in the marketplace is revealed.

Tom Fedro SWOT analysis for software companies

When defining your competitive advantage, think from the perspective of your target audience: Why should it matter to me? What’s in it for me, should I decide to engage your firm?  Answer these questions from the perspective of your prospects and discover a concise competitive advantage. Clearly differentiate yourself and demonstrate clear value, then go out and win regardless of circumstances.

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