Why companies are abandoning high profile software vendors

Choosing a software vendor is not easy. Unless you are a developer, it is unlikely you will have the level of understanding that they do about the technology you are buying from them. If you choose an established company, the same as everyone else, then in some way you feel less responsible — after all, your decision was based on their reputation and the recommendation of others. To choose a smaller company is against the norm — if something goes wrong it was your decision alone. Often (and understandably) executives will avoid this scenario.

However, the more clients I meet, the more stories I hear about these bigger providers making mistakes, causing delays, running over-budget, and costing their clients dearly.

High profile vendors = High profile mistakes

Andrew Egan has done a great job of explaining where issues can arise, using SAP as an example. SAP specialises in ERP (enterprise resource planning), which, in this case, was managing stock and inventory between warehouses and retail stores. To give you an idea of the scale, “78% of the world’s food is distributed using some form of SAP logistics software”. Egan makes the point that, with all of this success, there are bound to be failures. And, “when you are operating on the level of SAP, failure comes often — and often with a high profile”. He cites Hershey’s who, during an SAP software upgrade, made $100m in losses and one-tenth of their market share. Candy had sat in storage and not on the shelves during their busiest period, Halloween and Christmas, due to rushed implementation. The team had advanced the timeline by 18 months and therefore cut corners during critical systems testing phases.

Screw-ups cost you initially but also have the potential to become much more problematic. When it comes to software, small errors compound quickly. Delays, rushes, poor data management, or gaps in integration can mean you increase technical debt, risk more bugs, and miss out on user feedback that helps to build key functionalities.

The real failure metric is users

In 2018, global supermarket chain Lidl scrapped an SAP software update that had already run for 3 years and cost them $½bn. They blamed the failure on “process breaks, redundant master data storage, integration gaps and functional restrictions”. In 2014, a Fujitsu contract that was part of an £11bn programme to modernise computer systems in the UK’s national health system failed. MP Richard Bacon told officials: “The contracts were awarded in an enormous hurry, in total secrecy, bound up with huge confidentiality clauses and it was only after they were all signed — quite rapidly after — that people became aware that the contracts would not deliver what was required.

But many of these examples focus on the wrong thing. Often, companies measure failure by the return on investment of time and money. However, the true failure metric when it comes to a digital product is users. Release a bad piece of software (or update) and you’ll find users, and therefore clients, abandon you pretty quickly. It can even affect your staff and lead to mass resignations. A corporate executive I know has described colleagues being diagnosed with PTSD after particularly bad projects.

If you don’t have users, you do not have a product — and this is true if you are a company whose core business is your digital product (e.g. apps) or if it acts as a point of connection for users to buy or purchase goods (e.g. eCommerce websites).

Just last year Hertz filed a highly publicised lawsuit against management consultancy firm Accenture for a failed project to update their online presence, website, and app. These are all the systems huge numbers of users and customers use to access their service. They had hired Accenture in August 2016, with the new site due to go live in December 2017. An initial delay to January 2018 was missed, and then a second delay to April 2018 which was then also missed. What was delivered was a product and design that didn’t do half of what was specified and still wasn’t finished. “Accenture never delivered a functional website or mobile app,” Hertz claimed, and the company “no longer had any confidence that Accenture was capable of completing the project”.

Small vendors = Accountable and fast

Of course, there are not many small companies who can build complex products. And for the ones that can, you should pay attention to certain things. Ironically, the biggest thing to watch out for is the company that chooses to be small. For good reason too, small software and digital product companies avoid a lot of the mistakes that these high profile software suppliers make.

Less Politics, More Merit
Working with small product development companies means less politics and more merit. Smaller suppliers are available, accountable and responsible. There are fewer overhead roles to hide behind. They have skin in the game, so need oversight on everything they do.

Less Hierarchy, More Ownership
Smaller companies are more invested — if they screw up, they don’t have a company anymore. The higher your profile, the more it shields you from your mistake. You will lose a small part of your reputation with one customer, but have another ten walk through the door because you are top of the search engine results or a common name found on PSL’s.

Teams in small companies are just as capable of delivering as the bigger players. When it comes to hard-skills like development, the size of the company isn’t the problem. The size of the company does become a problem when you start factoring in layers of complexity like overheads, bureaucracy and management tiers. If you build with a small company, you know exactly who is responsible for your project, and they will know everything about it.

Less Bias, More Quality
Until recently, a lot of companies (including ourselves at Eli5) were offering both product validation and product building. While product validation is incredibly useful and important, you do not want the same team that is telling you what is or isn’t a good idea to then be the ones building it. For your builders, you should look for companies that purely focus on this and will instead help you to pick the perfect partner for the validation part of the project (my colleague wrote an excellent piece explaining why product/software development companies shouldn’t offer customer development services here).

Fewer People, More Specialists
The quality of a designer or developer at a small company improves exponentially over time rather than laterally, as they are involved with more of the process. Our staff are cross-functional and multi-skilled. We all sit in the same office, attend the same meetings and work on the same projects. So:

• There is nowhere to hide, so vital tests are not missed.
• We avoid the compounding effect of finding bugs or building important functionalities too late by working in design and development sprints — consistently and incrementally building and improving.
• We deliver a first version within 3 months, so you can test your concept out sooner rather than later (traditional suppliers have trajectories of 1–2 years for project completion, which is often the first time you see your finished product).
• We created a standardised solution which can be used to integrate the end-user solution we build, on basically any internal or external system regardless of how complex.

There are companies who see this and who choose to stay small. Like at my own company, Eli5, we are small by design. You can read more about this decision in our earlier blog: Building the right digital products will bring you more opportunities than you can handle.