Save content
Have you found this content useful? Use the button above to save it to your profile.
large dog and tiny one | accountingweb | The David vs Goliath of financial software
iStock_ealisa_small_dog_big_dog

It can pay to be small-minded when picking vendors

by

When selecting a financial software vendor, Kevin Phillips advises remembering how the story of David and Goliath panned out. 

30th Aug 2023
Save content
Have you found this content useful? Use the button above to save it to your profile.

My previous article on customer relationships in business today prompted a discussion with my colleagues about choosing a large vendor over a smaller, independent one. Is it still the case that no one ever got fired for selecting IBM, or is this a modern-day David and Goliath story, where the smaller, yet more nimble company can outperform a giant competitor, and is, in fact, the better choice?

Earlier this year, the South African arm of retailer Spar discovered that going big is not necessarily a safe bet, when a delayed systems applications and products (SAP) installation contributed to a 15% hit on their stock price. And on the other hand, is the “risk” of choosing a smaller, independent supplier, especially one that is highly specialised, real or perceived? And what can a smaller supplier offer that a global name can’t?

Ultimately, of course, this decision is down to each company and its specific circumstances and requirements. But it won’t be any surprise that I’d argue you shouldn’t automatically choose the supposedly invincible, “safer” giant. 

Here are five things to ask yourself when choosing a new supplier.

1. Will paying more mean I get more?

What are you actually paying for when you pay your hefty invoice every month with a big name company? Is it for a better service than you’d get anywhere else? Or is it to cover the costs of the trappings that make the big name big, such as rent for large offices (and especially naming rights to the building), salaries for the many people employed, and marketing to make sure they are recognisable globally? All these things prop up the perception that you are getting more for your money, without directly contributing to providing you additional value.

2. How important is customer service to you?

Would you prefer to be a big fish in a small pond, where your business is significant, even critical, to your supplier? Or would you prefer to be a small fish in a big pond, where you are part of the 80% contributing 20% of the revenue, and you’re all trying to contact the company via the same overflowing email inbox or constantly backlogged customer service number?

Service goes beyond troubleshooting and complaints. What about when you want to request a new feature, for instance? Will you be heard and considered, or will your request join the bottomless priority list?

3. Can you afford to pay for what you don’t need or want?

Jack-of-all-trades big-name suppliers often go to market with complete solutions that are offered at a single price tag. You have to order the all-you-can-eat buffet and don’t have the option to order off the a la carte menu. Can you afford this price tag – paying for things you don’t need or want – or would you prefer to integrate a range of best-of-breed services that do exactly what you need, in the way you need them to? With the rise of software-as-a-service, integration of best-of-breed services from multiple suppliers has never been easier – allowing you to add, subtract, change and scale with ease, as your business requirements evolve.

4. Do you want to deal with people invested in your success?

When your business matters to a supplier, your success and their success become intertwined. With smaller, independent suppliers, a founder or owner is very often still involved with the organisation, and cares about the success of the company and its customers. This translates into company culture, where each member of the team is working towards this goal. Compare this to the Goliaths of the world, where short-term shareholder value is the number one metric, and the vast team of employees are each looking after their own careers and advancement.

5. Do you want innovative services delivered in flexible ways?

Large, shareholder-beholden companies are like oil tankers – slow to respond and innovate. This goes beyond service innovation and extends to how they package, price and deliver their services, and how they interact with their customers. True innovation usually starts with smaller, independent startups, with larger competitors copying what they are doing years later, or even simply scooping up the startup to acquire the innovation.

Mistaking visibility for quality

In conclusion, I feel it is easy to mistake visibility for quality – especially in a world where time and attention are scarce. Greater visibility can be a case of over-indexing – as with the review sites I mentioned last month, or confirmation bias. Do you really think the person who signed off the hefty price tag with a giant is going to say they made a mistake? Ultimately this decision is specific to each company’s requirements, but tread carefully, lest you mistake Goliath’s thunder for lightning, missing David’s nimble spark.

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.