IT and Business Insights for SMB Solution Providers

Why ‘Too Big to Fail’ May Not Be the Best Reason to Choose a Vendor: Page 2 of 2

Size imbalances on both sides of the client-vendor relationship can lead to some negative consequences. By Steve Duckworth

Now let’s look at the other extreme: a large company buying from a much smaller vendor. In this situation, the relationship imbalance leads to a different, but equally difficult, set of challenges:

1. Senior management in large organizations have a tendency toward arrogance when dealing with small vendors.

This phenomenon is a natural consequence of the political environment often found in large organizations. Dealing with vendors in an arrogant and often aggressive manner is unlikely to get the best out of them, or encourage quick issue resolution.

2. From the vendor perspective, the account can be simply too large to lose.

The worry over cancellation and the concerns over cash flow (large buyers are often poor payers, and credit cards may not work because of the internal controls required) make the vendor too subservient for its own good or the health of the relationship. This not only feeds the arrogance mentioned above, it also means that the vendor will often ignore the needs of its many small customers to pamper the few large ones, thus creating a poor perception in the market.

The other consequence is the vendor surrendering to undue influence over the direction of the product roadmap. This can be especially damaging if the large customer has some peculiar or unique characteristics that need to be addressed—and which large business does not have those? Large customers have money and are often willing to spend it on customization of a generic product to bend it to their will. Not only can that money prove hard to turn down and the features hard to deliver, but the effect is a loss of control of the product timing and direction.

Generally, B2B relationships work best where the counterparties’ size is in balance (within a single order of magnitude). Remember this the next time you are buying or selling.

STEVE DUCKWORTH is CEO of Harmony PSA. In a career that began in offshore engineering, migrated into investment banking, and ended up with the co-founding of a software company 10 years ago, Duckworth has devoted his talents to developing solutions that solve project, accounting, and business process problems.

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