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Vendor Warning Signs

Henry Newman Recently I've run into a few storage companies I had trouble with in my job as a consultant because I ignored some obvious warning signs, so I thought I'd set a few of them down to help you avoid the same fate.

There are warning signs that buyers of technology should be aware of before they buy technology from any company. These signs are not absolutes, but when combined with other factors, you might want to look elsewhere, or at least wait and see what happens before buying technology from that company. Hopefully you'll be able to apply them to some of the storage and server vendors from whom you're considering buying products.

Product Delays

It is pretty well known around the industry that almost every hardware and software company is almost always late with new products. The question is, how do you define "really late," since almost every product is somewhat late?

If a vendor's roadmap for a product says it is expected to be delivered in three years and it's three months late, is that late? That's off by about 8%. On the other hand, if you have a roadmap for a product that is expected to be delivered in one year and it is three months late, then you're off by 25%.

Another thing to keep an eye on is the ever-changing schedule. Take the example of a vendor that keeps saying the product is one year away every three months. You would be surprised how often this happens. It's important to track this type of information. Get those road maps and save them, because it's not like the sales person is going to remind you that the schedule keeps changing; they want you to forget the fact that they're late. Also, be sure to ask for the presentation with the schedule, since more often than not there is a late addition to the presentation that is not in the printed materials. You might have to ask for the schedule slide more than once.

Here are some other product warning signs that make me take a closer look:

  • Feature set changes: These tell me that either marketing changed its mind about the product feature requirements, which always causes development problems and delays, or development found they could not do something they thought they could.
  • Feature set reductions: This could be a subset of point one, but reductions to me are a worse sign, because of the expectation set by the vendor to some customers and the ripple effect on testing and other aspects of the product.
  • Planned bug fixes or patches before the product is released: This suggests to me that all of the features, functions and testing have not been done, and are not going to be done before the product is released. A vendor that has planned bug fixes before a product is released likely knows that the product is going to have problems.
All of these can be signs that the vendor is having trouble, but there are other signs to watch for too.

Financial Issues

This is generally the easiest one to spot — at least for publicly-traded companies. Sites such as Yahoo Finance provide stock prices, financial news and quarterly financial information about companies. It doesn't take a great deal of work to find out if a company is making money, losing money, has money in the bank or does not. Having a few losing quarters is generally not that big a deal if the company is large, but consistently losing money is a bad thing. Consistently selling stuff at a loss to generate revenue is a bad sign.

Another bad financial sign is reduced revenues. You might still be making money, but if your revenues are declining quarter after quarter, this is another sign that something may be amiss.

Both of these issues can be signs that the company is not healthy, at least for now. The question is whether this can change. IBM in the early 1990s was losing lots of money and had declining revenues, but look at them today. Naturally, they were big enough and had enough money in the bank to turn the ship around (not to mention a great name and brand identity), and are far stronger today than they were before the problems started. One of the keys was having lots of money, but the other key was personnel and leadership.

Personnel Issues

Personnel tends to fall into three categories:

  • Management leadership (president, CEO, CFO, COO);
  • Technology leadership (CTO, VP of engineering, VP of manufacturing, senior engineering staff), and
  • Marketing leadership (VP of marketing, marketing directors).
Each of these areas is critical to success, and the loss of any of the important players in a company — or worse, multiple players — is a cautionary sign. Additionally, if some of these important players leave and are not going to a specific company, it can be a sign of internal struggle or shakeup.

People change jobs and look for new opportunities, and the loss of a single person for most companies is not a death sentence, but combined with other factors and leadership personalities, it can be a sign of internal struggle.

Issues with personnel are less obvious than financial issues, but if you are buying a great deal of equipment from a company and the company is smaller (less than $1 billion in revenue), then this becomes a more important issue. If your operation depends on this company, then you need to track this information.

M&A Issues

If a company buys another company how do they manage the resulting combination? Corporate cultures are different, management styles are different, and often clashes and ego issues emerge with senior technical people.

There are many examples of major mergers turning out to be a poor fit, but what about the private problems of merged companies that you don't hear about? When it gets really bad it becomes public, but often the warning signs are there long before the public outcry and financial problems. Keep your eyes and ears open.

Final Thoughts

Signs that a company is doing poorly are important if your infrastructure is dependent on that company. That is why many companies buy only from "well established" companies. These companies often don't have the most innovative products, but they do have the market staying power.

Long ago EMC was a niche player, as was QLogic and Emulex, but today they're all well established players in our industry. They did not get there without a large number of people buying products from them, so a large number of people took some risk at one point.

Sometimes you might have requirements that dictate that you need to need to buy from emerging vendors. You might have pricing issues, since emerging vendors are often a more cost-effective choice, or you might have performance or technology issues that require features that only emerging vendors can provide. Whatever the reasons, you need to understand the internal structures of these companies and their financial situation — and you also need to be wary of established companies when they start making mistakes. The danger signs are, for the most part, there and easy to spot. You just need to spend the time to look for them.

Henry Newman, a regular Enterprise Storage Forum contributor, is an industry consultant with 25 years experience in high-performance computing and storage.
See more articles by Henry Newman.