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Get Smart

  • May 01 2002, 1:00am EDT

Your company is gung-ho about signing an enterprise agreement with a business intelligence provider. Great! However, before you sign on the dotted line, you need to get smart and evaluate whether the BI provider will continue as a viable business to support you as time goes on. One of Gartner's top 10 predictions for 2002 is that "as many as half of all information technology suppliers that existed in early 2001 will disappear from the competitive landscape by the end of 2003 as they are acquired or go out of business" (Gartner Research, January 9, 2002). This prediction really makes one pause and take notice. Before you partner, you need to make sure your BI provider has more than just the feature/functionality you need.

There are a few things you should look into before committing to a long-term agreement. The provider's focus may be business intelligence, but you need to do a little intelligence work regarding their business. Objectives of this analysis are to determine their financial viability, technical viability and ability to survive as a company within their market space.

The alternative to conducting this "due diligence" is to sign the agreement and discover somewhere down the line that they have declared bankruptcy (What would this mean for you? Will the product you use be supported going forward?); been acquired by another company (Is the other company well-known? Does it offer continued support of the acquired product line, or will you be expected to convert to a different product?); or are closing their doors (Do you have any access to source code?). It is far better to analyze the situation before executing an enterprise agreement and plan for contingencies than to experience potentially dismal consequences.

The first thing to consider is the company's financial viability: How likely is it to continue as an ongoing concern? Look at their financial statements. If the company is publicly held, financial statements are easily obtainable. If the company is privately held, you will need to request financial statements such as balance sheet and profit-and-loss statements directly from the company. From these statements, you should be able to determine how much cash they have on hand. What is their burn rate –­ the amount of cash they "burn" through in a given period? What kind of revenues have they been able to generate? Are these levels sustainable given their pipeline of sales opportunities? How much capital have they been able to raise thus far (and in how many financing rounds)? Have they tried, unsuccessfully, to go public? Do they have a history that includes accounting irregularities (Heaven forbid! Remember Enron?)?

The company's viability in terms of its competition is also very important. What differentiates this company from its competitors? Is the company's architecture in line with the direction of the industry? Are they viewed as a leader or challenger in the market space? Or are they viewed only as a niche player? It is important to review technology market research analyst information (from Gartner, Forrester, META, etc.) for recent developments.

If you can ferret out information about the company's previous partnerships, including deal terms and expectations, that information can be valuable to those in your company making the enterprise sourcing decision. What companies have they partnered with in the past? (Are any of them your direct competitors?) What were the terms of the deals (conditions, pricing for basic services, equity stake, etc.)? How willing is the company to negotiate terms and conditions? Answers to these questions can give you valuable insight that can help you craft a deal with the most advantageous terms.

How viable is the company in its market space? Is someone likely to come in and take over support of the company's product line? Is it likely the company would be acquired just to remove a competitor from the marketplace? Is this company using state-of-the-art technology and standards, or is it likely to get subsumed by a larger technological market force? Look at the number of customers the company has added recently, as well as the average length of time it takes to implement a solution for a new customer.

Do you want to go into an enterprise agreement with a business intelligence provider with your eyes open or with your eyes shut? If you keep your eyes open and get smart about the provider, you'll know what risks you are facing. Keep 'em closed, and you may be surprised when the Gartner prediction regarding companies disappearing from the competitive landscape comes true. You may indeed face the wrath of your organization's management, questioning your previous decision, in addition to the harsh realities of retooling your solution. History tells us it's better to understand what you're dealing with and the options the company has for survival. Getting smart will benefit you and your organization.

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