Size Doesn't Matter

Jul 30, 2008

Joe Ruck

A former colleague of mine has a favorite story he likes to tell from his IBM days. I think most people have heard of the phrase, “Nobody ever got fired for buying IBM” even though today you might substitute Microsoft or Google.


Of course, people did get fired for buying IBM and it’s instructive to understand why. In this case, it involved an enterprise that agreed to pilot Office/2, then a new IBM product. Running on the equally ill-fated OS/2, Office/2 fell in the groupware category broadly comparable to Lotus Notes or MS Exchange today.


With no shortage of confidence, the customer chose the executive management team for this first time use. Not surprisingly, the trial did not go well and to add insult to injury, Office/2 was summarily “withdrawn from marketing” by IBM—a creative description synonymous with the term “canned”. Now, without any possibility of addressing the problems or otherwise moving forward, the hapless project manager found himself in considerable difficulty, and shortly thereafter found himself “withdrawn from employment”. In utter frustration he even physically assaulted the IBM systems engineer. Luckily, no injuries were sustained in the ensuing tussle!


Many companies will experience an Edsel moment of this kind. What sets apart successful companies is that they recognize their mistakes quickly and move on. Often, this means rationalizing the product line and leaving the market. In fact, a product line does not have to be unsuccessful in the market’s eyes for this to occur. It can be perceived as very successful, but if the product fails to make a profitable contribution, or is otherwise deemed non-strategic, it can be axed quickly and unceremoniously.


In these circumstances, customers have little leverage. It’s unrealistic to assume that a single customer can change the course of monoliths like Microsoft, Oracle, SAP, IBM or Google. The chances of any of these companies going belly up is, of course, rather slim, but if they axe a product line upon which you depend the impact on your company is the same. This is not unique to IT. Sony is a leader in consumer electronics and likely to be around for a long time to come, but the same cannot be said about your investments in Betamax, LaserDisc or MiniDisc.


Of course, this is not something that large companies draw attention to. Having worked in both large and small companies I can state with confidence that large company sales people will always tout the financial wherewithal of their large company as a prime selling point. It’s also common to suggest that all of the company’s huge resources are at the customer’s disposal. This is rarely true, and even large customers can find it difficult to get on a vendor’s radar when things go wrong.


Conversely, smaller vendors are typically focused on a single product. And although the risk of a company failure goes up with smaller size, it is easily offset by virtue of the fact that the smaller vendor is focused on a single product and market. A small company cannot afford disgruntled customers. This almost guarantees executive-level attention when a problem crops up. Small company engineers will work around the clock to address a serious customer issue. So, dealing with a smaller vendor provides useful leverage in the relationship. This extends to the product development effort, as well. Working with a good start-up lets a customer effectively steer the product development to better suit their needs.


There are pros and cons with vendors large and small and the oft-quoted concerns about smaller vendors are overblown. To net it out, size really doesn’t matter.


Joe Ruck is president and CEO of BoardVantage. Prior to joining BoardVantage, Joe was SVP of Marketing at Interwoven and part of the team that drove the company through one of the most successful IPOs of 1999. Previously, he held sales, marketing, and executive positions at Sun Microsystems, Network Appliance, and Genesys Telecommunications, subsequently acquired by Alcatel.


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