Achieve real competitive advantage by partnering with small IT Vendor networks

How does an enterprise achieve real competitive edge via IT these days and is it possible to develop a edge which cannot be easily copied?

It is harder than it might appear even if you do have “deep pockets”.

For today’s market is dominated by the big players such as SAP and Oracle.

So if my major competitor chooses SAP I can always “out-SAP” them through a more complete, better designed, better executed implementation of SAP (or a competitive alternative).

However this kind of copy-cat strategic response generally comes with a big price tag and time lag.

Also it is not a great story on differentiation if the underlying technologies are essentially the same or very similar.

So is there another way?

Ronald Exler, Director of Research for Robert Frances Group thinks there is.

“IT executives seeking to use the most innovative technologies have little choice but to turn to smaller technology vendors”

In an intriguing article in ebizQ, July 17 2005, (you need to login but its free and painless), Dealing With Small Vendors in the Elastic Enterprise Ron suggests that smaller IT vendors are:

  • More Innovative
  • At the forefront of Trends
  • Provide Superior Service

And I would also add:

  • More hungry
  • More responsive
  • More agile
  • More inclined to work in partnership

than the major IT vendors.

First Assess the Technology then the Risk

Ron suggests that if you can assess, reduce and manage the risks, (and he includes a number of very practical suggestions in an excellent 6-page PDF attached with Ron's kind permission) then you should seriously consider ‘dropping out of the herd’ and following a more innovative approach involving partnership with a small technology player.

And I think you can go one step further!

No small technology provider is likely to have the scale or the breadth by themselves to cover enough of your business technology needs if you are a significant IT user.

So why not incubate your own network of small innovative technology companies who collectively can cover your the patch by integrating their products with you as their test bed?

I dont just mean the technology vendors but also a mix of small service and support companies too.

Redundancy and Contingency

By using a network rather than a single company you can also design in redundancy and contingency in case some aspects of the technology don’t deliver (at all or in required timescales).

In fact you should plan on the assumption that it still needs to be a business success for you if only 50% of the technology delivers!

If you don’t build this in you are showing poor corporate governance.

The US defense sector have used similar approaches involving the building and running of parallel supply chains.

For example, a conservative chain (the banker) and a high-risk chain (the bet).

Typically the bet has a lower chance of delivery but if it delivers then the benefits to the customer will be much higher than the banker.

If the bet delivers you close down the banker - if not the banker is your insurance policy and you cash it in.

And you make on-going regular assessments on both chain's chances of successful delivery.

For more on this approach check out “The Agile Virtual Enterprise” by Ted Goranson.

Building your own IT VEN is not as difficult as it might seem

In a previous article I discussed the power of Virtual Enterprise Networks (VENs)

Some of these VENs (e.g. The Stac (Scotland)) are based around major ‘anchor’ companies who foster innovative small technology supply networks around the larger enterprise's research and development needs.

By being smart in the way you set-up your own IT VEN you can ensure:

  • A financial win-win for yourself and the whole network

  • You have first option on all new technologies the network produces

  • An entrepreneurial peer-peer culture in the network to stop it turning into a master-slave supply chain

And use it to shake-up your internal IT culture!

This kind of approach can also be used to create some really interesting future possibilities for career development in your IT department in terms of staff secondment and even spin-outs as the IT market inevitably evolves into its next phase!

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Your concept of the IT VEN is intriguing and I see smatterings of this approach amongst my large enterprise clients. However, since many of them are banks or other financial services institutions, they tend to be very conservative and take "the banker" approach to technology as that is embedded in the culture. Some are starting to experiment more but it's a slow change process.


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