When it comes to your software vendor and the software you depend on to keep your business running smoothly, few things are as important as choosing the right vendor. Too many companies learned this the hard way in 2008 when the economy tanked and many software and services companies went under. Businesses that relied on them suddenly found themselves orphaned, stuck with software that had no easy upgrade path, with no hope of recouping whatever resources, whether money or time, invested in the software.
While the economy may be showing signs of recovery, and businesses are optimistically looking to the future, one thing is certain: there will be future downturns and there will be companies that don’t survive. How can you be certain your software vendor will weather the next economic storm?
How to Choose Your Software Vendor
Choose a Company with a Proven Track Record
One of the easiest ways to weed out potential vendors is to look at their track record, primarily within the last 10 years. How long have they been in business? Have they been in business long enough to survive previous economic downturns? Have they gone public or are they private?
In terms of long-term success, the IT industry has one of the highest failure rates. According to StatisticBrain, only 37 percent of information technology businesses survive their first four years in business. So while that cool new startup may seem to have an amazing new product, it won’t do you any good if the company isn’t around to support it.
What should you do instead? Do your homework and don’t be afraid to dig deep when choosing your software vendor. Adam Golden and Dawn Scaiano from TechRepublic, outline a few of the areas you should investigate:
“After you’ve determined which vendors are industry leaders, evaluate each vendor’s financial stability, including its available cash, its ability to continue product investments, its outstanding obligations, payment history (by looking at Dun & Bradstreet reports), and company profile and credit ratings. For public companies, financial data is accessible from financial Web sites and public filings like 10Ks and 10Qs.
Review the company’s balance sheet, profitability, market share, market capitalization, and analyst opinions. For private companies, limited information may be available. However, you can request financial information from them as part of your RFP process.”
Choose a Nimble Company
While longevity and stability are important, they certainly aren’t the only factors to consider. Sometimes a company’s greatest strength can become its greatest weakness if it relies on it too much and fails to innovate.
Consider the examples of IBM, Apple and Microsoft. Each one of them, in turn, became complacent, confident in their business and their products, only to be eclipsed by the other. The personal computing revolution, which Apple helped lead, caught IBM by surprise. Microsoft’s Windows operating system and aggressive marketing, in turn, caught Apple by surprise. Twenty years later, it was Microsoft’s turn to be surprised by Apple’s foray into mobile devices, first with the iPod, then the iPhone and iPad. Recently, Microsoft has displayed its own nimbleness by unveiling mobile software initiatives that have gained significant momentum.
In each case, however, why are these companies still here? Because, regardless of their size, they all adapted to the ever-changing market. Despite being caught by surprise, they each made adjustments to catch up, survive and thrive. Unfortunately, Silicon Valley is filled with the corpses of companies, many of them long-lived, that failed to do just that.
Hanging in the Balance
As with many things in life, the best options are often not found at either extreme. There are many companies that have a proven track record of surviving and thriving, even during economic downturns. At the same time, these companies are small enough to display the agility needed to adapt to the disruptive changes so common in the IT industry.
Whatever company you choose, do your homework. Ask the tough questions. Doing so will help you choose your software vendor wisely, and have confidence they’ll be there for the long haul.
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