Monday, July 06, 2009

Are digitization providers in financial trouble?

I've been hearing from people whose ears are to the ground and who are raising concerns about some digitization providers. If you are making a huge investment, then you want to know that company is going to be around for a number of years. (You might want the company to be around for the length of your project or for the length of the warranty, for example.) The question becomes do you know how your service or hardware provider is really doing? Here are some suggestions:
  • Ask for references and then talk to the people/organizations that are on the list. Ask them about the company, its products and services, changes it has seen in the company, etc. (Have there been a lot of personnel changes?) Be sure to ask if they know of any other customers and then talk to them. How many reference do you need to check? I don't want to create a rule, but start with three that the company has given you and then see if you can talk to three who are not on the list. Perhaps you can even find organizations who used to use that vendor and have switched to someone else. (And why did they switch?)
  • Check the news for any tidbits about the company. The key here is to check the news media in that company's geographic location. Check using any news databases that you have access to as well as news sites on the Internet. The local business journal may have written stories on the company, so be sure to check that source. In general, check for stories from the last 1-2 years.
  • Consider contacting the reporter who wrote a story about the company and asking if they have any additional (more current) information. Do they have an idea of how the company is really doing?
  • When checking for news, check for the company's name, product names, and its top executives. Check for stories from the last 1-2 years.
  • Organizations in the U.S. such as the Better Business Bureau (BBB) and Chamber of Commerce may be of some help. However, the BBB only knows about those companies that have registered with them and who have received complaints. The Chamber generally only knows about its members and may not want to tell you if a member is in trouble.
  • The local court (city/town or county) should have records of any judgments against the company (if indeed any have occurred).
  • If the company is in your geographic region, then stop by and look at the facility. Make an unannounced visit! I would also advocate talking to other businesses in the area and asking what they know. (Fast food joints and coffee shops might know more then you think.)
  • A private company does not have to release its financial statements. Any financials they tell you have not been independently audited like those for public companies. Therefore, don't take as being completely true any financials you are given (e.g., sales figures or growth rate).
  • Don't immediately dismiss any rumors that you hear. I learned many years ago that 80% of rumors are true. Now that could mean that 80% of all rumors are true or that 80% of any rumor is true! Keep track of rumors and then see if the information can be verified. Do not base your decisions solely on rumors.
  • If the vendor is not in your geographic region, or if information is being published in a language that is not your own, consider working through your colleagues in that region for help. These are people that you know through your professional associations, conferences, etc. While they may not be able to dedicate a lot of time to your efforts, they may be able to gather a few pieces of information for you.
  • Talking to former employees (if you happen to stumble across any) can be useful, but keep in mind that they may have an ax to grind. Therefore, be ready look for information that supports or refutes their claims.
  • You might want to post questions on appropriate email discussion lists or social networking sites asking for information. This may surface rumors and facts, and it will be important to be able to tell the difference and do some additional research, if warranted.
I can hear you saying that you don't want to do this research and that it would take too much time. If you are not establishing a long-term relationship with the vendor, then this may be overkill. If you are expecting no long-term support from the vendor, then this is not needed. However, if you are working on a project that requires your vendor to be around (and healthy) for a long time, then spending time to investigate the vendor is warranted.

While this type of research won't take a long time, it may be a more time that you have available, therefore, consider using a library science student to help with it. Given the economy, you might have the student compile information on all of your vendors in an effort to discern if any are in vulnerable positions. Not only would this be worthwhile information for you, but it would be a great project for a student.

If you find information that you want to discuss with the vendor, please do so. Hearing the company's perspective is important, but remember that it is one piece of complete the story.

Finally, a company (vendor) should not dissuade you from doing this research. A company that is in good standing and that has nothing to hide will want you to know how good they are. A company that is on shaky ground may encourage you to forego any check of their background. If the company seems to protest too much, that may be a clue.

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martin said...

I can see hwere you're comingf rom, but I'm not sure this approach is helpful: the fact that a company is small and new may mean it is more likely, not less likely, to survive th downturn. Gathering large bodies of informal information also places an obligation on you to deal with it fairly - and would you be in a position to reject a tender because an ex-employee you met raised some concerns? It is right, though, to note that any contractor-supplied content should be trated as a major risk to the project , with contingency plans should they fail to deliver for whatever reason.

Jill Hurst-Wahl said...

Martin, good points. Depending on the services the vendor is offering, a small company may be able to survive the economic downturn better. What we might not know is whether the company has the funding to do it well.

I would not make a decision solely based on information from an ex-employee. I would keep in mind that part of that person's view is legitimate and then try to discern which part that is.

Yes, I know that the organization could wind up with a large amount of information to handle. Likely the amount of information will not be tremendous due to the fact that most private companies do not disclose that much about themselves.

Yes, the organization would need to be able to take the emotion out of the decision-making and often that is hard to do. I didn't talk about creating criteria upfront for how you're going to make a decision about vendor do deal with. That criteria would be very helpful.

BTW the tips I presented are some of what a business intelligence professional would do when researching a company.