Small Vendors Have Solutions Too

Recent findings by VentureOne, the venture capital research arm of Dow Jones, shows that the average investment in IT-related initial public offerings increased dramatically in 2004 (to $133.7M from $72.6M in 2003). So investors are expecting bigger things from information tech in the coming couple of years, but what remains to be seen (beyond whether this basic assumption proves true) is whether those big things involve small companies growing through dint of effort into bigger companies, or whether they simply act as unafiliated R&D departments for some future big vendor with a taste for acquisition.

Given what I’m hearing, I’m betting on the latter—but I’m not liking it. Big vendors seem inclined to go on buying sprees once again (Cisco, for instance, had a dozen acquisitions last year, the most since 2000 and more than 2001-2003 combined.) And best as I can tell, many if not most CIOs are still wary about buying products from smaller vendors.

It’s not as bad as it once was, of course. Gone are the days when IT execs would get a hunted expression and start rubbing their scars whenever I asked if they would consider buying products from a startup. But even the CIOs that say “yes” these days load the answer with enough caveats about proper due diligence and niche opportunity and mission non-criticality that I doubt many startups have a prayer of navigating the minefield.

And that’s a bad situation for both small companies and CIOs. If startups and small players are forced to think of themselves as takeover targets first and foremost, it can’t help but taint the direction of their products. Instead of concentrating on innovative ways for IT to do its business, they’ll have to think about filling holes in existing product lines at the megavendors. Sure, there’s bound to be some overlap between the two mindsets, but the former is more likely to take the risks that could lead to dramatic technology shifts.

To that end, I’m making a plea: Let a small vendor take you to lunch this month. Listen to what they have to say. Set up a skunkworks to give their product a try. It doesn’t have to cost you much. Heck, some of these little guys will give you product, set it up for free, and sleep in the parking lot, waiting to help 24/7 if anything goes wrong. If it doesn’t work out, at least it will be refreshing to work for a while with someone who really loves their product.

And who knows, maybe someday you’ll get to look back and say “I knew them when.”