Finding the Best Tools

The search for better tools has centered around an ongoing question: Do you buy the best-of-breed tools and suffer integration problems, or do you buy an integrated set of adequate tools? Do you go for the best functionality, or do you settle for something with less functionality that is easier to deploy and operate?

Current industry trends give you help in answering these questions. Considerable consolidation is occurring within the management industry. Economic difficulties are forcing smaller companies to look at being acquired as a means of ensuring survival. Larger companies may gain the advantages of faster time to market and a broader portfolio of products when they acquire a startup instead of developing new products themselves. Larger companies also see that innovative startups are much less expensive to acquire than they were in the late 1990s.

Customers often feel that they have to decide whether to bet on a small innovative startup that may not survive or on a large company that will be there to support them, but that offers less functionality (often at higher prices).

Large companies with aggressive acquisition strategies blend the best of both alternatives. Startups give large companies innovation more quickly and cheaply than internal development. In return, the startups get the financial resources, sales, support, brand recognition, and customer base that can move large amounts of product to the marketplace. Service management has seen such market consolidation as larger companies fill out their portfolios by acquiring smaller niche players.

Faced with such turbulence among management tool suppliers, what is your best choice? Well, I have been advising clients to look for innovation as one major factor. Innovation is needed to reduce costs, redirect staff, and maintain high service quality. Fortunately, there are often several companies offering new capabilities and similar innovationsusually because the next problem to be solved becomes pretty obvious to the industry as a whole. Partnering with a small, innovative company also gives you the chance to influence their development in a direction that meets your needs.

The next step is to evaluate the viability of the candidateswho has the funding or board contacts to survive? Another way of assessing viability is to look at alliances. Innovative startups that have distribution, cross-selling, or other collaborations with large management vendors are more viable because they can move large amounts of products, and the large players tend to acquire companies with which they are already working.

Using this approach to vendor selection reduces the exposure to a startup that sells its products and then closes its doors, leaving customers without support and a future growth path. Balancing innovation with survivability is the new art of buying products.