Vendor Stability Matters Too - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
Software // Information Management
Commentary
1/29/2009
10:13 AM
Seth Grimes
Seth Grimes
Commentary
Connect Directly
Twitter
RSS
E-Mail
50%
50%

Vendor Stability Matters Too

Technology is important, and so is vendor stability. You want solutions that perform, and you need to be confident that providers will be there for support and upgrades. I've seen evidence that two software vendors I follow are facing business complications. Here are their stories, a cautionary tale, names withheld as an ethical compromise...

Technology is important, and so is vendor stability. You want solutions that perform, and you need to be confident that providers will be there for support and upgrades.

When I see evidence that companies I follow are facing serious business complications, do I relate what I see, possibly adding to the difficulties faced by companies I'd like to see succeed, or do keep my views to myself? This isn't an abstract dilemma. I have two software vendors in mind. Here are their stories, a cautionary tale, names withheld as an ethical compromise.Call them Company X and Company Y. They are two among the dozens of BI, data warehousing, event processing, and analytics providers I track, both relatively young companies. They know who they are, but for the purposes of this article, readers don't need to.

Company X's software automates a high-value analytical process. These capabilities have become quite sought-after. Company X is a technology leader, and it and several of its competitors are recording and projecting very strong revenue growth despite the current, dismal business climate. Regarding 2009 Q1 sales, the CEO tells me, "worst case is that we'll do about 95% of our best ever quarter, and if we close anything else we'll blow it away."

I like Company X enough that I recommended it to a start-up looking for a technology provider.

Mergers and acquisitions are an IT-world constant. Company X joined up at one point with another company with similar but complementary technology and markets, a company that had been limping along for years but had recently won a very significant contract. Company X's CEO heads a segment of the joint operations. Too bad he doesn't run the parent company, whose CEO, it seems to me, boasts Larry Ellison's aggressive arrogance with none of Ellison's vision and ability.

The parent's market valuation is down 70% since the merger; trading was recently halted while (ominously) finances are clarified. I hope Company X survives the looming, likely divorce in good health – for its customers' sake and for its own – and that the market doesn't punish Company X for the sins of its parent.

Company Y's circumstances are different, but the viability concern is the same. The company is an independent, started by very experienced and competent industry veterans. Unlike Company X, Company Y is selling a new approach into a very mature market. Nimble start-ups can do very well, but Company Y faces the challenge of competing with both well funded start-ups and multiple, large, established solution providers.

Company Y has itself attracted significant venture funding. The company has won deserved favorable analyst and press coverage. It shows every sign of growth... in all areas except customer acquisition. The company does have prospects in the pipeline and a couple of marquee customers although it lost one due to a business decision unrelated to its software. What has gone wrong, or rather, what hasn't gone right?

Company Y has taken a very careful approach to cultivating opportunities but has only a "handful" of customers several years into its existence, according to an executive I spoke with. The market's not the problem: bright-light competitors launched after Company Y have dozens of wins. It doesn't seem to bother them if they're not winning a few high-touch, expensive-to-conduct face-offs against Company Y.

I project that Company Y's venture funding will be eaten up by the fall. In today's business environment, and given the competition the company faces, Company Y may find it difficult to secure sufficient additional funds. My money (figuratively) is on a late-2009 acquisition by the likes of Oracle, IBM, and EMC.

If I were a Company Y customer or prospect, I'd be concerned about the company's viability as an independent and about my situation if (when) Company Y undergoes a disruptive change in ownership. If Company Y is acquired, worst case is a gutting similar to what DATAllegro is undergoing at Microsoft's hand. Microsoft's Project Madison, when it eventually bears fruit, will bear little resemblance to the pre-acquisition, open DATAllegro appliance. If I had been one of the 2 or 3 pre-acquisition DATAllegro customers or a prospect, I would have started looking at other provider options as soon as the deal was announced. If I were a Company Y customer or prospect today...?

Actually, I'll cite a Company Z, this one by name: Interwoven, a content management vendor that is being acquired by enterprise-search leader Autonomy. Interwoven Universal Search is powered by Vivisimo Velocity. How long will it be before the text "Vivisimo is a leading provider of enterprise search software and expertise" disappears from Interwoven's Web site, regardless of the product change-over cost to customers?

I have meant this analysis as a caution, as a reminder: Technology is important, but so is vendor stability. A provider that is facing serious business challenges, whether due to possible parent misadministration (Company X) or lack of sales growth (Company Y) or evidence of being positioned for sale (Interwoven), will be distracted at best, perhaps unreliable, and likely a source of undue risk that should motivate customers and prospects to explore other options.Technology is important, and so is vendor stability. You want solutions that perform, and you need to be confident that providers will be there for support and upgrades. I've seen evidence that two software vendors I follow are facing business complications. Here are their stories, a cautionary tale, names withheld as an ethical compromise...

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Slideshows
Reflections on Tech in 2019
James M. Connolly, Editorial Director, InformationWeek and Network Computing,  12/9/2019
Slideshows
What Digital Transformation Is (And Isn't)
Cynthia Harvey, Freelance Journalist, InformationWeek,  12/4/2019
Commentary
Watch Out for New Barriers to Faster Software Development
Lisa Morgan, Freelance Writer,  12/3/2019
White Papers
Register for InformationWeek Newsletters
Video
Current Issue
The Cloud Gets Ready for the 20's
This IT Trend Report explores how cloud computing is being shaped for the next phase in its maturation. It will help enterprise IT decision makers and business leaders understand some of the key trends reflected emerging cloud concepts and technologies, and in enterprise cloud usage patterns. Get it today!
Slideshows
Flash Poll