What Happened to Martech Consolidation?
Martech vendors were supposed to merge, and tech stacks were supposed to shrink. So, why is the martech landscape growing by 27.8% year on year?
Technology is central to marketing at every type of company. Without technology, there would be no website, no CRM and no reporting. For years now, CMOs have invested a growing share of their budgets in marketing applications in order to drive more revenue and expand marketing capabilities. Tech stacks have now grown to the point where, in many organisations, the discussion is often about tech stack consolidation rather than technology acquisition. Yet, every single time I've worked on a tech stack optimisation project, we've ended up adding new technologies as well as removing existing ones.
The Landscape
The same discussion has been taking place regarding the overall marketing technology landscape for several years. There has been plenty of buzz around vendor consolidation, and numerous high-profile merger and acquisition deals in the martech sector. Such talk only heightened after last year's Venture Capital crunch, which resulted in a significant drop in investment for start-ups across the entire technology ecosystem.
For all the talk of vendor consolidation, the reality is very different. A couple of weeks ago, Scott Brinker and Frans Riemersma released the 2024 version of their famous Martech Landscape diagram that attempts to map every marketing technology available to purchase. According to their research, far from shrinking, the Martech sector actually expanded by 27.8% last year to encompass an astonishing 14,106 different software apps.
The Long Tail
Operational flexibility is one of the key reasons for the growth in martech. Acquiring any new application requires adapting your processes to fit the application, as well as customising the application to fit business requirements. Companies have always struggled with onboarding applications for this reason, to the point where many Fortune 500 enterprises are choosing apps from niche vendors over market-leading solutions. These niche vendors may only have a small number of customers, but they're typically far more tailored to the unique requirements of those organisations.
These long-tail applications are rarely at the core of enterprise technology stacks. If anything, there has been greater standardisation of CRM and Marketing Automation systems across marketing departments in recent years. However, firms are more flexible about which point solutions they're willing to integrate with their core applications. There is significantly greater diversity in the event apps, data platforms and management tools deployed within tech stacks compared to five years ago.
For technology buyers, integrating such applications into their technology stack is much easier. The growth of open APIs means that businesses are not reliant on expensive custom development to integrate apps into their core technology stacks. The right integrations are often a selling point of niche applications, while low-code development platforms mean that custom integrations can be spun up quickly and easily where needed.
The Modular Approach
In theory, low-code development allows entire applications to be built from scratch within the marketing team. This does happen in most organisations, but only for one or two very simple use cases. Low-code development still has a significant learning curve, while also being more restrictive than dedicated tools. As such, custom CRM or marketing automation workflows are still the preferred approach for bespoke requirements that can't be fulfilled cost-effectively by external applications.
Together, these trends encourage a modular approach to building a martech stack - an approach known as composable architecture in tech circles. It is now much easier to rip and replace elements of the technology stack as business requirements evolve. This massively improves both cost efficiency and business agility, particularly in fast-growing organisations. Composability is a hot topic in technology circles right now. The low cost of developing new web applications means that the number of apps available to purchase will only grow, even if individual tech stacks start to shrink. And that's before AI-assisted development opens up technology to non-technical users even further.