Avoid Buyer’s Regret: Top Tips for Assessing Infrastructure Provider Health Before Purchases and Contract Extensions

With large enterprise infrastructure purchases for services, including SASE, SD-WAN, wireless, and more, on the line, the tech behind the services may be proven, but can the provider deliver? Is the provider having business problems? What can buyers do to avoid regret or devastating mistakes?

“Enterprises are going to have to prepare for a lot of vendor consolidation over the course of the next two years and then service provider consolidation through the end of the decade,” explained Jeff Heynen, VP of Broadband Access and Home Networking at Dell’Oro Group, a global market research and analysis firm. “Right now, because operators are cutting back on their spending, vendors are retrenching and looking to cut costs. Some are looking to shed parts of their business to focus on their core operations.”

A Provider Health Checklist

Here is a list of items to check to help determine how a potential tech partner is faring business-wise.

Strategic reviews: Rarely announced publicly, in favor of behind-the-scenes activity, these crucial undertakings often result in substantial changes in the way a service provider or vendor determines its product and staffing priorities. The results can lead to phasing out products and business units and result in several of the actions listed below.

Project cutbacks and selloffs: One major infrastructure player confirmed late last year that it was cutting back its fiber service deployment markedly and sold parts of its tech assets, including CDN customers, to a major player in the sector. It is best to know of these actions as soon as possible before they are announced publicly.

Layoffs: Staff reductions can also signal problems as these cost-cutting efforts are often justified as rightsizing. The goal here is to determine why they are needed. Is your provider outsourcing a potentially crucial function, such as service and support, to a third party or preparing to drop a product line? Layoffs are expected after a merger or acquisition to eliminate duplication of efforts. But how will they affect your business?

Push past the stated percentage of total staff being cut to other vital details, such as what areas will be drawn down. Do they include sales, service, support, marketing, product development, engineering, or management?

Finances: Try to keep pace with your vendor/provider’s financial health. This is also essential before greenlighting a big ticket and/or big project with a new partner. Check out the provider’s annual and quarterly numbers – with help from your internal financial experts. Total revenue is often the most touted number discussed, but CapEx and profit growth are more important. Wall Street financial analyst reports can help.

Inactivity: No news is not always good news. Look for news of new customer wins, product enhancements, and partnerships to explore new areas. Filling gaps in products/technologies is also good news. Contacts developed inside your providers can be a priceless resource, more so if they depart the company.

Ownership: Are any of the vendors or operators you are considering for a major tech advancement project owned/run by private equity (PE) firms? Many regional fiber operators saw large PE investments or purchases in 2023. Green is good, but be aware that these firms typically acquire firms, boost the high performing assets, and shed much or all of underperforming or struggling assets before a sale. A transition can be rocky and usually includes a change of senior management.

Timing: Do any of the providers you are considering have incidences or a history of delivering products and services late/missing deadlines or TBD? The tech trade press tries to keep track of promised delivery and actual shipment. One Massachusetts business was excited to receive the newest networking gear from a prominent vendor until the boxes arrived empty.

Market research and analysis: These firms track industry sectors, subsectors, and vendors from startups to near duopolies on an ongoing, quarterly, or annual basis. Some rank players by leaders using business performance and often know vendors better than businesses looking for a solution provider. These firms also identify buying and tech trends (in the U.S. and internationally) that can be invaluable for your pre-purchase.

Vertical industry groups and associations: These organizations and their associated events provide an opportunity to meet with other companies that face business and tech challenges similar to your company's. Attendees often discuss the experiences of vendors and operators they have done business with or plan to. The takes of other users and this environment can be more useful than vendor-held annual gatherings as they are more focused, covering the IT and business needs - and more independent.

A Final Word on Picking an Infrastructure Provider

Learn which signs of provider health to be concerned about before making a commitment to a potential long-term partner to help your enterprise change the way it does business for years to come. Missing signals could result in a decision you may later regret.

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