Size matters?

In a bad economy, what happens to the vendors? Who wins, who loses? Where do customers go for value yet security?

First, let’s talk about the big guys? They like to go elephant hunting…they need to win big, big deals because the expectations are so high from their investors. But…the elephants start to disappear in a down economy (it’s the big deals that get scrutinized and canceled by the CFO first). So the mega-vendors try to get aggressive on price to compete for smaller budgets but…these vendors have a fundamental problem…their products require tons of services and support, which means no matter how low the software price is, the cost of ownership is still very, very high and cannot be reduced.

Surely then customers go to smaller vendors where they can typically reduce their costs and reduce their budgets? Well yes and no. One of the issues with the small vendors in a down market is that many of them don’t survive. They cannot drive the revenue to make them profitable, the investors don’t have the appetite to keep adding to their investment and so they end up being sold off cheaply.

So, where does the customer go to (1) Reduce their costs but (2) Keep their risk to a minimum.

The answer is that customers still need to find the smaller vendors to be able to reduce their costs and cut budgets, but they also need to ensure that their vendors are well funded, have good investors for the long term and have good established customer bases and recurring revenue streams from multiple different types of customers.

More tomorrow….

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