Platforms vs Pure Plays

Arun Matthew (Partner at Accel) captured the moment at G2’s Reach conference, calling out “best of suite” versus “best of breed” as a top theme of 2023 and for going into 2024.

The question of “platform or pure play?” impacts software buyers, vendors, and investors. 

This note aggregates platform versus pure play research to help lay out the benefits for all three stakeholders.  

For Customers: Platforms vs Pure Plays

2023 has been a favorable environment for platform solutions. The “2023 G2 Software Buyer Behavior Report” shows why:

  • 84% of respondents would prefer to purchase one tool to solve multiple business problems rather than multiple tools.
  • 78% of respondents like to buy complementary products from a single vendor they already work with.
  • 83% of respondents prefer to renew a product than switch to a new vendor.
  • 82% of respondents believe it is important that the software they buy integrates with tools they already have.

However, these buyer preferences do not cover whether platforms deliver better results or superior user experiences versus point solutions. 

This distinction between organizational buyers and day-to-day users is worth exploring.

To compare customer satisfaction for platforms versus point solutions, we partnered with G2 and analyzed:

  • A sample of 12 software categories with clear platform versus pure play dynamics. 
  • Examples of categories included Video ConferencingBusiness Instant MessagingSales EngagementConversation Intelligence, and Account-Based Marketing
  • At the product level, these categories created obvious comparisons like a) Zoom vs Google Meet/Microsoft Teams and b) Slack vs Microsoft Teams  
  • These comparisons were conducted at the specific category level using G2’s comparison tools. 
  • For example, when we compared Gong (a pure play) to the call intelligence module of Hubspot Sales Hub (a platform), we used G2 ratings only for Conversation Intelligence.      
  • A total of 46 software companies were included in the analysis.
  • Caveat: this is a directional and exploratory analysis. Choosing the right software is always case-specific and requires due diligence.

So, what do the results show?

Overall, platforms narrowly edged pure plays: platforms won 7 categories (58% of the total) versus 5 wins for pure plays (42%).

Platforms and pure plays were perfectly equivalent (8.69/10.00) on an aggregate weighted customer satisfaction basis.

At the G2 dimension level, pure plays won for “Ease of Use,” “Ease of Setup,” “Ease of Admin,” and as a “Good Partner.”

This is a rare situation where an “It depends” answer is perfectly justifiable.

Note: Drilldowns by G2 Dimension – like Meets Requirements or Positive Product Direction – are available in our reference slides:

For Vendors: Platforms vs Pure Plays

The “Clydesdale Rule” from Brian Halligan (Co-Founder and Executive Chairperson; formerly CEO) of Hubspot succinctly captures the attractiveness of multi-product strategies for software vendors: platforms create 4x leverage:

The Clydesdale Rule has clearly worked for Hubspot: in their 2023 Analyst Day, Hubspot disclosed that 62% of their deals are multi-hub, and ~40% of their $2.1 billion ARR is generated from product lines not present at their IPO.  

Of note, Hubspot was included in five software categories (Sales Engagement Platforms, Sales Conversation Intelligence Software, Account-Based Marketing, Landing Page Builders, and Help Desk Software) for our platform versus pure play research.

For software vendors considering a multi-product model, Meritech (a technology venture capital firm) succinctly summarized the pros and cons: 

I can only add a few specific call-outs to Meritech’s strong summary:

“Increased TAM (total addressable market) to sell into” — Hubspot’s TAM has more than doubled from $25 billion at IPO to $51 billion today.

“Enduring and durable revenue growth (even through downturns)” — Investor presentations from several multi-product SaaS vendors show the consistency of growth from additional products. Here are a few examples of growth durability (with more in our slides):

  • Crowdstrike: % of subscription customers with 5+ cloud modules has increased every year from 2% in FY2018 to 63% in Q2 FY2024
  • Cloudflare: % of customers with 8+ products has increased every year from 24% in 2018 to 48% in 2022  
  • Toast: % of locations using 6+ elective products increased every quarter from 24% in Q2 2021 to 43% in Q2 2023
  • Datadog: % of customers using 4+ products increased every quarter from 28% in Q2 2021 to 45% in Q2 2023 
  • Workiva: % of revenue from multi-product customers has increased every year from 37% in Q2 2016 to 62% in Q2 2023 

“Lower customer acquisition costs (CAC) given new products can be sold to current and new customers more efficiently” — a few notes:

For “Increasing net revenue retention rates (higher expansion, upsell, and cross-sell)” and “Lower churn rates” — A few examples:

  • Hubspot: Multi-hub customers have a 300 bps higher NRR than average (90% NRR vs 87% NRR)
  • Salesforce: Multi-product have lower attrition rates (see slides) and 3x-300x(!) the ARR vs single cloud customers
  • Cloudflare: 10+ product customers have increased their revenue contribution by 15x from 2019 to 2022 

I am particularly opinionated about many software companies’ over-reliance on NRR expansion:

“There is a ceiling on expansion. Taken to the extreme and absurd, ‘let’s buy 3.5 Zoom seats for every employee’ doesn’t work.”

This Crowdstrike customer journey shows the power and duration of multi-product growth simply not available to point solutions:  

From Meritech’s considerations list, “Going multi-product too early can cause a loss of focus: Act I and prior “acts” need to be working already / well-oiled machine” highlights the selection bias inherent in platform case studies

By definition, successful platform companies have earned the right to win. A strong first base product:

  • Created goodwill with customers to be willing to buy extra products
  • Brought in revenue to fund investments in growth
  • Earned the trust of the Board of Directors to make those investments
  • Built by good product managers, engineers, and executives — that is, a good team to build the next thing

Going multi-product might not make sense for a vendor in a number of circumstances:

  • A bootstrapped SaaS might lack the capital and personnel needed to launch, scale, and support multiple product lines
  • Some categories might not need platforms — a point solution is actually what the market demands

For Investors: Platforms vs Pure Plays

For all of the above reasons, multiproduct software businesses are very attractive to investors.

Tidemark Capital and Lone Pine Capital research from a “Platforms of Compounding Greatness” series highlights multiproduct companies have:

  • Higher revenue multiples
  • Higher market capitalizations
  • Higher absolute revenue
  • Higher free cash flow (FCF) margins
  • Higher “Rule of 40” (a measure of combined growth + profitability) metrics

Scoreboard: Platforms vs Pure Plays

So, what do the results show?

For Customers: 1 Modest Win for Platforms. While platforms very narrowly won our *user-centric* analysis, the strong preference of *buyers* towards platforms was the deciding factor.

For Vendors: 1 Strong Win for Platforms

For Investors: 1 Strong Win for Platforms

In total, 3-0 for Platforms.  

The Future: Platforms vs Pure Plays

Already a challenging exercise, the dividing line between what constitutes a platform and a pure play will get blurrier with each year for a few reasons:

Composability + Aggregation: 

Scott Brinker and Frans Riemersma recently outlined frameworks of composability + aggregation in software:

The “84% of respondents would prefer to purchase one tool to solve multiple business problems rather than multiple tools” (via G2’s 2023 Buyer Behavior research) fits within a consolidation framework, which generally favors platforms.

In a composability + aggregation future — where – per Brinker + Riemersma – users “apply the best features to each particular use case, independent of the software products in which those features are hosted. Instead of ‘best-of-breed,’ we think of this approach as ‘best-of-feature’” — the distinction between platforms and pure plays matters less.

Artificial Intelligence (AI):

Recent studies have shown AI enables meaningful software development productivity gains: A McKinsey study found that documenting code functionality for maintainability can be completed in half the time, writing new code in nearly half the time, and optimizing existing code in nearly two-thirds the time.

For pure plays, AI-enabled shipping of new features and products could represent a “graduation” to platform status.

For platforms, AI-enabled engineering gains will also lead to new features, representing an evolution to “super platforms.”

Importantly, AI will allow platforms to re-factor *old* features and products. 

Older products tend to have lower *user* satisfaction scores (see Brinker + Riemersma using G2 data), which can create the opportunity for younger pure plays to emerge.

If AI can enable “legacy” platforms to re-write and modernize old code bases like Oracle is doing today with Cerner (founded in 1979), platforms might become further advantaged:

Going back to the scoreboard framework, platforms would likely be favored over pure plays in a rematch. But future dynamics — like AI or the increasing sophistication of software user stacks — could change the sport altogether.



New Cloud Ratings Product: True ROI

Cloud Ratings has gone multi-product, too: our category quadrants are now complemented by True ROI reports.

Our first True ROI report covers RELAYTOa software suite that turns static files into interactive web-based content experiences.

Customer interview results were translated into a True ROI financial model with quantitative benefit and cost estimates, reflecting a 3-Year ROI of 4,748% (47x) and 2.0-month payback:

Per G2’s 2023 Software Buyer Behavior Report:

Vendors are on the hook to show quick value. Of respondents who anticipate software spending to increase in 2024, the necessity to realize an ROI within 6 months is the most important consideration during the purchase process.”

True ROI Reports can help you quantify and provide 3rd party validation of your software product’s business value.

If interested in learning more, consider booking a demo with me:

If a demo is too much, but you would like to learn a bit more by email, click here.

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