Industry Insights: The Case for Small Vendors

I recently attended a user group meeting for a small yet well-established network-management software provider and noted both of the aforementioned advantages. Although a few power customers directed the conversation, the vendor acknowledged everyone's requests for improvements and tried to accommodate them.

The Financial Reasons

You'll probably be asked by your business manager to defend the financial viability of your chosen vendor. One of the first steps you should take is investigating the vendor's financial statements, which won't be an open book if the company is privately owned. After doing a little digging, however, you should be able to obtain this information or at least some details about the company's last round or two of funding. Fortunately, a small company's financial records are typically simpler than a large company's, making it easier to see whether the company is on the right track.

Large companies may not parcel the information in their financial statements into the units you need to determine how well a particular product line or division is faring. And if they do provide the necessary information, they may also do clever things to make a business unit look like it's doing better than it really is.

For example, Hewlett-Packard's 2003 Q1 results show the company's PC division with a $33 million profit. Yet The Wall Street Journal points out that, starting in Q1, HP adopted Compaq's methodology of reporting some R&D and corporate governance costs to a section of its business report that cannot be allocated to a specific segment of its business. In other words, who knows what the PC unit's real profitability is!Having watched the tech industry crumble over the past few years, we can point to many situations in which business units or entire large companies have had to deal with the same level of financial frustration as their smaller or less established rivals.

A Reasonable Strategy

As an IT professional, you often measure risk. Every day you weigh the pros and cons of each product or technology you consider. If you're evaluating an unproven vendor, examine the previous successes and failures of its technical and business management. This will help you gauge the likelihood of the company's future success.

Also, as you do with your personal finances, make your risky bets the smaller ones. Don't bet the farm on something uncertain. But don't disregard a vendor just because it isn't No. 1. You might miss a golden opportunity.

If it turns out your risky bet pays off, be vocal about it. You might even offer to serve as a reference or beta site--possibly getting better and maybe even less expensive support in the process. You'll also be giving your vendor a well-deserved chance to become the vendor no one was ever fired for buying.Post a comment or question on this story.

-- Mike Lee [email protected]