JoelOnSoftware.com has an article by Joel Sposky on how to succeed with software in a market already dominated by a competitor. Suggestions: admit that it is dominated by a competitor, find ways for customers to be able to switch, and lower the barriers to entry for your product. Sposky can speak authoritatively because he was a developer on products you may have heard of like Microsoft Excel and some original design work that became Visual Basic for Applications.