Should You Protect Yourself From Vendor Challenges?

Earlier this week, I played a rather optimistic note on the spend keyboard when I wrote that providers were generally having solid quarters. It might have been a more accurate statement, however, to suggest that many providers are seeing a good business environment. It turns out that I learned of two vendors in the space this week that are currently attempting to either raise funds or sell the business. And I heard about another that is in the process of attempting a management buyout or related restructuring. These providers have names that many of you would be familiar with. While the situations are far from perfect in each of the three cases, each provider is at or near the top of their game in their respective markets. They have satisfied customers, good products/solutions/services and viable business models. I'd sooner invest my own capital in them than in a big three automaker, if that tells you anything.

Should existing customers be concerned in these cases? Probably not overly so, as in each case, the companies and products will ultimately end up in someone else's hands. And the more solution and services driven vendors will either take a new shape or restructure into smaller service delivery groups (with the same talent behind them). But what typically suffers in acquisition situations is innovation, which, as the Good Doctor Michael Lamoureux has argued for so long, is critical to achieve savings and results. So if you're a software customer working with someone you consider reputable, don't lose sleep -- but don't expect a commitment to anymore innovation unless you know your provider is on sound financial footing. And in cases where you're contracting for professional services, it's always a good practice to structure contracts that provide reasonable out clauses, along with named team members (when you're working with smaller or mid-size firms).

Out of this time of change will no doubt come a stronger provider landscape. But for most users out there today, there should not be much cause for concern -- nor a wholesale rush to big names and the ERP providers for security. Many of the current names that Spend Matters readers log-on-to, consult-with or outsource-to each day could not be doing better if we consider the overall macroeconomic climate (and yes, in Vinnie's defense, there are good deals to be had at the moment). And I know of a number of smaller providers realizing excellent growth at the moment as well.

Still, if you are worried about your individual providers and their economic situation, drop me a line. I'll happily share with you what I'm hearing -- offline. But I don't want to interfere with the current activities going on given the economic environment by dropping names of said providers on the blog at this time. As to those who might comment on this post, I would suggest that readers discount everything unless someone puts their name to it. Why? An anonymous commenter could easily be a competitor attempting to spread fear, uncertainty and doubt about someone they are worried about losing to. And personally, I will not confirm, deny or comment on the validity of the comments in writing.

- Jason Busch

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