As a young division director in a large company, the notion that “big businesses do business with big businesses” was drilled into my head. It was the conventional thinking of the time, but times have changed, so is it still the right perspective?
Later, as a buyer of enterprise systems, I began to see cracks forming in this line of thinking. Some of our competitors were taking manageable risks and going with solutions from smaller, more nimble upstarts and driving better results than what we were able to achieve from our “safe” choices from the “big guys.” Not wanting to be cutting-edge of new technology, we’d opt for the herd mentality of “tried and true” and “steady as she goes.” We’d get good, not great, results and would typically have to compromise on our wants.
It’s not a capabilities thing
I’ve been on both sides of the desk in large organizations and small. As a seller of systems at a small company, we were often in contention to proactively win some business from a big brand. One prospective customer had been using a solution from a larger competitor of ours for eleven years and still weren’t getting what they wanted. We convinced them our solution could deliver, and be complementary, but at the last minute, they couldn’t pull the trigger. Why?
Most organizations fall into the same traps. Ironically, choosing big software vendors is typically not about capabilities. Here’s what I believe happens:
Fear of making career-limiting decisions. You can’t blame people for playing it safe. But after nearly two years of the pandemic rippling through the world’s economies – causing supply chain back-ups, power outages throughout China from lack of coal, container ship congestion and long delays at major ports, truck driver shortages, government interference and public policy indecision, continued country-wide lockdowns – companies are finding those safe systems of yesterday were never designed to handle today’s challenges. Hard-coded and industrial-strengthened, they expertly execute rigid rules. Newer platforms are more resilient and better able to handle the ebb and flow of the modern world.
Unwillingness to replace existing solutions. Over time, organizations prefer to maintain the legacy behemoths they’ve accumulated, as these familiar systems and processes have become ingrained into the culture and institutionalized. When it’s time to buy a new system, many companies are inclined to go with whatever solution the existing system of record has in hopes of avoiding a major overhaul. They choose to follow the path of least resistance; however, switching to or adding a SaaS based platform may actually be the path of least resistance today rather than staying with the existing provider.
Career-limiting decisions. It’s logical to think a $200 million or $1 billion software company is bigger than a $20 million one. But is it? Say for instance you want to effectively digitize the transportation management parts of your business. Your ERP vendor claims they have that feature – just pay an additional licensing fee and activate it. However, you are impressed with the features and functionality of a smaller provider who specializes in digital transformations – it’s their core business. But they’re a tenth the size of your ERP vendor. What do you do? Start with an “apples to apples” comparison. In many cases, as you dig into it, you’ll find the smaller provider may actually be bigger than the competing business unit within the larger company. In other words, the $20 million specialist may have more resources and capability than the team supporting the TMS module at the big ERP company.
Why a smaller provider may be a better choice
Composite vs. Unified. Sticking with the same platform “in name” does not imply “unified.” Many software companies today are what I call “composites,” or made up of several parts – usually acquisitions – that are pieced together over years and not designed from the ground up as a unified solution. Some of the bigger companies started out as point solutions such as accounting, HR, or CRM and have grown through add-ons to round out to a broader offering. Smaller companies that have a “natively unified” suite of solutions have built these capabilities from the ground up to communicate and work together faster and seamlessly, making them streamlined, less monolithic, and fast.
Bad decisions have a way of propagating themselves. When I was CEO of a small $500M business, many of our customers were US-based multi-nationals and we decided it was easier to grow with our clients as they expanded around the world rather than hunt for new customers. They wanted us to serve them consistently, the same way, everywhere, so we chose to install a single instance of our platform to be responsive and keep our support costs in line. We then had an opportunity to acquire a competitor. They were also global but followed a different approach – they installed a separate instance in each region, multiple instances in some. While being the same size in revenue, their IT overhead was more than triple ours (one reason they were for sale). They couldn’t support customers uniformly in different territories, while we easily could.
Big businesses have big costs that get passed on to customers. For a period of time, I played an important role in a global, multi-billion-dollar company. We were perplexed as to why our pricing was consistently 10-15% more than our competition. Size was a key reason. Unlike smaller competitors, we dealt with significant overhead costs: local overhead for plant and business unit management, alongside regional and corporate overhead. Those consolidated G & A costs added up to making us more expensive. The bottom line is, be sure to compare the G&A expenses of your providers with others. Obviously, smaller providers will have lower expenses making them more competitive, not to mention better agility and a quicker time-to-market for you.
Ultimately, no two transformations or organizations are exactly alike, and each will have to do the work to determine what’s right for them – sometimes that might be a big business, and sometimes it won’t. The key is to do the work and not discount innovative options from smaller providers just because they’re small. In today’s high-pressure, competitive, and complex environment, those unafraid to take chances are rewarded. Go after your wants and needs – and don’t be deterred by size – or push back internally – if a smaller, innovative business has what it takes to deliver. The proof is in the flexibility, agility, and efficacy of the product, not the brand name.
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