Evaluating Vendors - Company Size

In software, the size of the company is important, but not in the way you think. Most big companies cannot compete with the little companies for quality, service and new features. Yes, that's right, the little guy does do software better. The reasons are obvious once you think about it.

Before I begin though, I want to make one caveat. Small companies run by venture capital are put squarely on the big company side of this comparison. This is because VC run companies in general are run the same way as big companies, with big budgets and grand schemes. My definition of a small company for this comparison is a self funded privately held company. Small companies that do well are those that focus on a single product (or single product line) in a niche market. These are the expert specialists to the big company generalists. The Davids to the Goliaths.

Support - Big companies used to excel at support. That was their big selling point. Not anymore. As more and more companies try to save money by outsourcing their call centers to low-wage countries, the support they provide to their customers suffers. Even the companies that haven’t jumped on the outsource bandwagon are still gutting their call centers, replacing real support people for low wage script readers.

Now compare that to the small companies that don’t have a call center. You call them and you get the developers directly or you get the owners directly. These people know what their product or service does better than anyone else because they made it. These are the best people to talk to when you have a support issue. I am not knocking foreign countries or low wage earners; I am knocking the practice of dumping quality support engineers for unskilled or less-skilled labor to save on cost. You don’t get the same level of support from an unskilled or low-skilled script reader that you get from a developer.

Quality - You would think that big companies would have this area covered. You would think that big companies have so much at stake with their reputation that they would never ship inferior products or services. Unfortunately that is no longer the case (if it ever was). Just read some of my earlier posts for examples of this.

Small companies again win out here because this is where they focus their energy. Small companies do not have the budget nor the manpower for flashy presentations or for sponsored weekend “seminar” retreats to sell you on their product. They do not have the luxury of corporate America buying on brand recognition or Super Bowl Ads. The small company focus is on the quality of their product or service.

If you think about it, a small company is a big company without all the sales and management. With a small software company, the percentage of engineering developers to total staff is close to 100% (the company is the engineers). In a small consulting services company, the percentage of consultants to total staff is close to 100% (the company is the consultants). The engineers and the consultants are a company’s core team. They are the producers of the product or service that the company sells and that you are looking for. As we move up in company size, the percentage of core team to total staff tends towards 0. When you employ the products of services of a small company you are getting the most core team for your buck, you are getting the closest to the essence of that product or service.

Stability - The knee jerk reaction is to go with the big company. Think Oracle and Peoplesoft here. How much stability does Peoplesoft have if Oracle finally succeeds in buying Peoplesoft? None. How much stability does Oracle provide when they decide to drop your product line? None.

Granted small companies fail frequently, but so do big companies. Big companies don’t have to fail like Enron to ruin your day. Just a little reshuffle and your critical project is outsourced or end-of-lifed or outright killed. From a customer standpoint, big companies provide no more stability for your needs than a small company.

Price - Almost always, the small company has better prices than the big company. The little guy doesn’t have a fleet of jets to support or a city block of corporate offices. The little guy doesn’t have 7 figure salaries for the top layer of management. The little company needs to be competitive on pricing because they need to gain customers, so they keep their margins thin.

Customization - This is where small companies really excel over big companies. If you want to install and run your big company software, you usually must pay one or more (sometimes many more) consultants for an undetermined amount of time. This price is usually higher than the cost of the software itself.

My experience with software from small companies is that:

The installation/customization is of short duration

The installation/customization cost, if there is any, is reasonable compared to total cost.

They want to hear your ideas for new features. A key competitive strength of the small company is their ability and willingness to implement new and different features quickly.


It doesn’t take a big company to make software. It doesn’t take a big company to make reliable software. It doesn’t take a big company to provide dependable and responsive customer support.

Next time you are evaluating software, think about this before you exclude the small company from consideration. You may just be excluding the wheat from the chaff.

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