It’s a fact of business life that technology vendors sometimes go out of business or sunset their products. This happens less than most customers fear, but when it does, the results can range from damaging to catastrophic. Therefore, a prudent enterprise will monitor key technologies and suppliers for potential problems.
At Real Story Group, a lot of our research goes into reviewing “vendor intangibles” to help guide customer decision making early on. Over the years, we’ve found a failing vendor or open-source project will exhibit telltale signs. By identifying these signs, you the customer can conduct your own risk mitigation accordingly.
10 warning signs a vendor is failing
1. Significant fall-off in new customers
When a vendor fails to attract new customers at historically meaningful levels, it can indicate something is wrong with the offering—usually that it has fallen behind its peers with respect to intrinsic functionality or its core value proposition.
Over a period of quarters or years, a decline in new customers almost always reflects deep problems—even if the vendor continues to make a good living off support and maintenance fees.
2. Declining—or no—community events
In the long run, a technology platform is only as strong as the customer and partner community that surrounds it. Vendors and employees come and go; satisfied customers tend to endure.
Online discussion forums are great, but when a vendor does not hold regular customer events (ideally in different geographical areas), or open source communities don’t organize such confabs, it could mean several things—none of which is good.
3. Disrupted product support
All customers complain (usually with good reason) about inadequate product support. Sometimes support lapses can come amid high growth and expanding customer demand.
In other cases, however, support disruptions can stem from operational chaos or cost cutting due to failing revenues or the desire to juice a firm’s financial statements prior to sale. Departures of the more experienced (read: costlier) support engineers in favor of novice replacements can be a warning sign.
4. Serial acquisitions
If a product gets acquired multiple times and moves through three or more vendor hands within a single decade, it’s usually a sign of a deeper problem or market mismatch. Each successive vendor believes they can “fix” the problem, but in reality, by the third owner, the underlying shortcomings have usually calcified.
5. Rapid vendor staff turnover
Staff turnover is a fact of modern corporate life. However, when you see rotating-door positions and large segments of senior teams leave around the same time, it’s usually a sign of a serious internal problem. It also can be a precursor to an acquisition; in that event, there could be a more-than-usual disruption for you after any deal closes.
6. Escape to open source
Sometimes a commercial vendor will get tempted to put their technology into open source. They fantasize that a community will form to drive product development while the vendor focuses on more lucrative product support and consulting.
But when the product has plateaued or is on a downswing, this typically becomes “abandonware”—software that’s commercially supported but rarely advanced in the absence of a meaningful community of third-party developers.
7. Slower product updates
As products mature, updates tend to slow down naturally, as the vendor or open source community needs to support a broader install base (and larger code base).
However, consistent delays and unusually long quiescent periods can suggest that a vendor or community is distracted by other demands.
Like the metaphorical slow-boiling frog, the daily impact of this stasis is rarely felt. But the longer-term consequences can be catastrophic because the level of effort to convert a lagging tool into state-of-the-art technology can become too large for the vendor and prohibitively painful for the customer.
8. Evasive salespeople and account reps
Salespeople and account reps tend to be optimists by nature, and they are not always given to sharing bad news. The same goes for deeply committed adherents to a longstanding, open-source project. Receiving evasive answers to simple questions about roadmaps, support and pricing signals vendor flux. If that flux is accompanied by other signals in this list, then they (and you) are likely headed for trouble.
9. Meandering roadmaps
Roadmaps represent vendor aspirations. For the customer, they often prove more important in the big picture (where is the technology headed strategically?) than in the details.
Therefore, when vendors or communities shift product roadmaps consistently, it’s a clear sign of strategic uncertainty, which may in turn be symptomatic of a lack of leadership or internal resources. In any case, a product that at various times goes in different directions is usually a product that is actually going nowhere.
10. Distracted founders
Founders play outsized roles in software companies and open source communities. As companies and open source communities mature, leadership often transitions to a broader—or different—set of people. In fact, this is usually a healthy sign.
However, if founders start to turn their attention elsewhere before transitions are complete, it can create a significant pause in evolution that in some cases could prove fatal.
Score Your Vendors
Concerned that one or more of your technology suppliers might be headed for trouble? Add up the checkboxes and see how they score.
1-2: Remain vigilant, but don’t panic
3-5: Create a solid Plan B
6-10: Locate your nearest exit
Failure knows no boundaries
You will frequently hear technology cheerleaders argue that a particular attribute makes a certain technology immune to failure:
- “Our package is open source, so it will never go out of business.”
- “Our appliance is a black box that will keep on running.”
- “Our company is too big to fail—we’ll always be here to support you.”
- “As a cloud-based supplier, we have to keep your business every month to get paid.”
None of that is true. Open-source projects can fade away. Bankrupted appliance vendors will leave you unsupported. Big vendors like Google, IBM, Microsoft and Oracle can—and do—change their minds about significant products. Cloud-based vendors have gone out of business (in some cases abruptly).
The time to start building a risk profile is when you first license a tool, and again when you renew a significant commitment—even if you are not seeing any obvious warnings.
In any case, you should consistently monitor your suppliers on an ongoing basis so that you can respond accordingly and avoid nasty surprises.
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