IT and Business Insights for SMB Solution Providers

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

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

If you are responsible for hiring a new vendor for your business, the risks inherent in that decision can be massive.

Will the vendor’s processes, people, or systems fail? Will you pay the vendor too much for the value they provide? Will the vendor delay access to revenue, or cost you revenue altogether? Will they violate a law or regulation?

Of course, all these risks culminate in your own personal risk. Will you be able to keep your job if the vendor you hire fails miserably?

Hence the popularity of buying from giant vendors deemed “too big to fail.” If you’re a small business, though, buying from a massive company can present a risk in and of itself. In fact, size imbalances on both sides of the client-vendor relationship can lead to some negative consequences.

Take the case of a small business buying from large company:

1. The small company’s business is not a significant portion of revenue or contribution for the large company.

Large businesses are run on key performance indicators that measure trends within demographic sets (for example, what are our retention numbers for MSPs with fewer than 10 employees in the Midwest?). These demographic categorizations, which may be good for targeted marketing, are actually quite terrible for measuring the performance of ongoing support teams unable to easily differentiate tickets in the same way.

The natural presumption that all small businesses are the same is simply not true in the MSP space, but the nuances are tough to categorize in demographic models because they do not fit clean definitions. The inevitable consequence of this situation is a perception of poor support because the offering is necessarily generic while the demand is specific.

2. The scale at which large companies operate makes it tough to offer uniform implementation services.

The work necessary to get a PSA functioning correctly cannot be underestimated. You would think that making that happen in a small business would be easy, but actually it can be more challenging than for larger companies. In small businesses the owner(s) often spend some of their time fixing customer issues directly. Such businesses do not have the margin for dedicated implementation staff. They also count pennies and worry about the cost of vendor implementation support. The combination of distraction, lack of dedicated time, and overt cost containment is a perfect recipe for a failed implementation.

Combine that with a large supplier deploying commodity implementation staff who may not know enough about the complex software they are trying to support and it’s not surprising that so many implementations either fail to complete or fail completely.

3. The ability of the small company to influence roadmaps and feature debates is lost.

Product managers tend to deliver broadly what they perceive is important (or what plays well in marketing terms), with little ability to actually determine what will make a real difference. Feature requests often fail to stand out from the background noise on forums, which are often filled with complaints. User groups are similarly hard to manage, and it’s difficult for a small business to be heard over the chatter and influence wielded by large customers. For all the talk of communities, it’s not easy to get new ideas up for discussion, let alone delivered, with so small a share of voice.

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