Meantime, those tech start-ups that have been smart or nimble enough to scramble over the VC wall aren't in the clear. They now face a phalanx of IT buyers trained to demand long-term financial and product viability. It's no longer enough for a start-up to have built a better mousetrap; potential customers want to see the vendor banking revenue from that mousetrap and clearing a healthy margin--and, preferably, offering up customer testimonials to the mousetrap's value and versatility.
Such rigorous due diligence is understandable. No IT professional, especially in this job market, wants to be left holding the bag when the start-up he or she recommended goes belly up or gets swallowed by a shortsighted competitor.
But we may be going too far. Gordon Stitt, founder and CEO of Extreme Networks--an industry leader launched just six years ago--thinks the deck is now stacked against young innovators because IT customers have become "obsessed" with cash flow and other vendor financial metrics. Vendors don't usually fail or retreat because they run out of money, Stitt argues, but rather because they didn't make the proper strategic investments in areas like R&D and support infrastructure.
Also consider these nonfinancial questions when sizing up tech vendors: Has the company's product/ technology focus remained consistent over time, or does it shift with the latest market trend or buzz paradigm? Does the company's vision extend beyond its next product iteration? Is that vision grounded in customer needs (like trapping mice efficiently) or is it technology overkill (fiber to the trap)? Is price or some other fleeting competitive advantage the vendor's only value proposition?
Take a Chance
Clearly, IT pros are in no position to put their necks on the line by purchasing from start-ups that offer only marginal advantages over blue-chip rivals. But don't just clip entrepreneurial companies and other second-tier vendors from RFPs because they're not household names with pristine balance sheets. Sometimes it pays to take a chance on unproven vendors if their product or contract terms are right. Do the risk analysis based on your company's own unique requirements and financial wherewithal.
Likewise, don't be so certain that no one ever got fired for betting on IBM, Microsoft, Cisco, SAP and other "sure things." No question, those formidable vendors and their mature products aren't going away anytime soon. But consider how wise it is to lock into a proprietary architecture. How safe it is to select software rife with bugs and security holes. How prescient it is to install systems that don't scale. How prudent it is to pay a hefty premium just for a brand name or buy products that are a nightmare to install and integrate.
It's up to you to put "disciplined" buying practices into proper perspective for your management and colleagues. Assess vendors carefully, but be sure to give everyone a fair shake. In an IT spending environment that places a premium on safety and conservatism, innovation needn't be a naughty word.
--Rob Preston, rpreston@cmp.com
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