Protecting Yourself from Providers: Emptoris and Beyond

Just as I got back to the office on Monday after two weeks spent gaining weight and changing my kid's diapers (all the while trying to stay somewhat current on industry happenings), a friend and colleague dropped me a line with advice for a post based on a situation he found himself in. His client is an organization that is considering buying solutions from Emptoris. They wanted to best understand how they could protect themselves given all the chatter in the market. This person suggested a few tips that are fairly standard in situations like this. These included: relying on an on-demand model to protect against high levels of capital expenditure (and potential sunk-cost), using milestone payments if licensing a CD version, escrow accounts, etc. He also threw out a few additional ideas including interviewing the new owners about their plans, talking to the CEO, coming up with a list of questions that focus on engineering, R&D and other employee retention strategies, etc.

All of these basic and more advanced questions make sense for companies considering best of breed vendors in the current economic climate -- and especially those such as Emptoris who are going through significant upheaval (either positive or negative). But I would add a few more ideas into the fray as well. In addition to looking at internal metrics and programs to keep customer satisfaction at acceptable levels and to protect against capital investment loss in the case of insolvency or support discontinuation, I'd suggest the most important area to look at is the feelings of current customers. Don't just ask for a few references -- ask for twenty. And call a few at random on the list. Better yet, avoid going to the vendor directly. Rather, use your network -- or social network -- to find out who else is using the vendor's solutions. And reach out to them without a referral.

These conversations will hopefully result in one or two situations: facilitating a decision to look elsewhere or providing peace of mind to stay put with the decision to work with the vendor. They'll also sometimes give you additional leverage to go back and negotiate with the vendor. What types of questions should you ask other customers? Overall satisfaction, support levels, adoption, usage, etc. are all good places to start. Also, it can be very revealing to gauge how open the vendor's communication and availability have been. For example, has the customer had access to senior engineering staff or the CEO to voice their concerns and opinions? Have support levels tapered off in recent months or have any of your support contacts left the organization? All of these can be signals that something is amiss or that you should restructure an agreement based on your new found discoveries.

At the very least, taking the time to do this type of due diligence can save you a few bucks by providing additional negotiation firepower. And in some cases, it could save much more -- including your job. As someone who has personally lost a significant investment in a platform from a vendor that no longer supports their product thanks to their inability to remain a viable independent organization, I wish I had paused to think about these points or telltale signs of trouble earlier. When I have some more time to revisit these ideas later in the month, I'll put together a definitive post suggesting the categories of questions and specific questions that you should ask to protect yourself. Until then, the rough ideas I've listed above will hopefully be of help.

- Jason Busch

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