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From little things, big things grow

From little things, big things grow

CIOs find the innovative and service-driven nature of small, start-up IT vendors attractive, but there is a risk that such ventures can fail and leave customers in the lurch.

Small start-ups may lack the resources of large established software vendors, but they deserve full marks for their responsiveness to customers. Consider this interesting proposition from Chris Saad for software buyers. "If there is a feature a customer wants, we can probably get it into our product," says Saad, chief executive officer and co-founder of Faraday Media. Better still, it may take as little as a week to deliver the new feature. "That's not quite the same timeframe as IBM or Microsoft," he points out.

Saad is able to make this kind of promise because Faraday Media is a small company that can quickly devote resources to customers' requests. It has just five employees and a plan to create what Saad calls "tools, platforms and products that help people create a personally relevant new media experience".

For Saad, the current pool of customers is important to the company. That can mean the occasional scramble to show just how responsive the company can be - an experience that is probably familiar to any small business.

Garage firms go global

A spectacular rise from humble beginnings is almost certainly an experience applicable to some of the biggest IT companies in the world. Hewlett-Packard, after all, grew from the confines of a garage to become a global giant with turnover of more than $US100 billion ($108 billion). Apple more or less invented personal computing and also started out sharing space with cars. Yahoo!'s founders infamously made all-night shifts an important part of the company's culture and early success. Microsoft, Google and countless other IT companies had similar beginnings, yet converted little more than some bright ideas and people willing to champion them into companies with global clout.

Of course for every start-up success that achieves Google-scale success, there are probably thousands that do not make it out of the garage. Hundreds more make it to market without ever achieving notable success. Many fail outright, often leaving customers in the lurch as they evaporate into bankruptcy or oblivion with their products unsupported or orphaned.

Such failures are, obviously, not the kind of thing most CIOs are looking for when they contemplate how to spend their IT budgets, creating a natural caution when CIOs taking into account governance and other matters consider doing business with start-ups.

"Selling product is a little bit harder for a start-up," says Mike Solomon, former CIO with law firm Gilbert + Tobin and now an independent business consultant.

"You assess what you are buying and how important your investment is, and ask yourself if the vendor will be around in 12 months. You need to assess if they can support the product too."

"Or it might be something with such a short life you do not care if they are not around to give you version 3."

Another concern is whether working with a start-up can mean finding that some of the risks of product development - but not the rewards of future implementation by other companies - are transferred to the customer. "Are you buying version 1.0 or version 0.1?" Solomon asks.

Saad, however, believes that there is also an upside to working with a start-up, as CIOs can gain early access to innovation that may not be available elsewhere, while also experiencing the care and attention that few vendors provide.

"We walk a line between having our own vision and direction, while also listening very closely to the market.

"If a customer has a compelling idea there is a good chance it will come into our product," he says. "A start-up will always look after the companies that represent their bread and butter."

Good customer experience

Saad's opinion that start-ups can deliver a better customer experience is supported by the experience of Richard Cohen, group IT Manager at PFD Foods. Cohen took the chance to work closely with a start-up vendor because it offered an opportunity to get involved in the development of a product that could be used to tackle salesforce productivity issues.

"A typical scenario would have seen a sales representative visit a customer, take the order and then phone the order through," Cohen says.

"There was a lot of double and triple handling," Cohen says. "Some of our reps would even go home and rewrite orders, then fax them through."

That was a slow and inefficient process that did little for morale and productivity, and led PFD Foods to look for a vendor that could provide it with sales force automation tools, he says.

The company that Cohen selected to help improve this process was Repsmart, a Melbourne start-up that has grown out of Digital Tree, another software developer. When Cohen chose Repsmart, sales force automation was a new venture for the start-up software company.

His decision to do so came down to Cohen's assessment that the product met PFD Foods' needs better than others he had seen, and his belief that engagement with a company in its early days would pay dividends.

"I was quite relaxed on the strength of the product and the business model on offer," Cohen says, especially given that the licensing arrangements were simple and cost effective.

Service with a smile

Victor Rodrigues, audiological software manager and software development manager for Cochlear, has also had positive experiences with a start-up.

Rodrigues bought Jira - a bug tracking, issue tracking and project management application - from Sydney-based start-up Atlassian five years ago and says the positive experience has changed the way he deals with vendors.

"I was fairly reserved initially," Rodrigues says. But he was also frustrated with the kind of service he received from larger software companies, feeling they were often impersonal and tried to save costs by directing him to self-service options.

"I wanted to explore what it was like to work with a small company," Rodrigues says, and he therefore started working with Atlassian.

Today, he actively seeks out companies that offer the kind of experience that Atlassian delivered.

"It was a breath of fresh air," he says. "They made it easy. I certainly did not feel like I was being ignored," he says, adding that the company happily provided service and support through multiple channels, including local telephone support.

The success of the project meant that Rodrigues was later able to buy further products from Atlassian, whose products are now widely and successfully used beyond Rodrigues' own development team.

One byproduct of the decision to take on the start-up is that Rodrigues is still the administrator responsible for Atlassian products within Cochlear. Rodrigues says the products require no effort to operate. Cochlear's systems group is aware of the software company's presence but is content to let Rodrigues operate it.

"By being close to the software I am closer to the users," Rodrigues says, and therefore more able to extract value from the software.

Vendor model

Rodrigues now says his experience working with a start-up has been such a success that he now uses it as his template for new vendor engagements.

"I now tend to look for leaner, cheaper versions of products since that experience," he says. He also looks for vendors with high-touch service models that he feels come from start-ups, instead of hands-off service from larger companies.

"We used Amazon S3 for a time and we had a problem," Rodrigues recalls. Amazon would not provide the personal service he had experienced working with Atlassian, and he has since stopped using its services. An encounter with Google has reinforced his views.

"If you are trying to contact a real person at Google, forget it. It won't happen," he says.

Service is also important to Mike Solomon. "When it comes to things like development, it is a different ball game completely," he says. "I have used some very creative individuals - a couple of guys who worked out of a garage [because the innovation on offer was unavailable elsewhere]".

Solomon says he also used a start-up that had an application that was unique for a piece of work we were doing. They were in serviced offices in the city. Despite the obvious lack of resources, the compelling nature of the technology won out.

Sow the seeds

Access to innovation is something that Faraday Media's Saad believes is the most important part of working with start-ups. Indeed Saad's company already works with one other Australian start-up - social networking company Tangler - in order to access its innovative tools and tap into the culture that supports start-ups and Web 2.0 technologies.

"Tangler is a way that we support our users and encourage users to have a personal relationship," Saad says. "We are using it to build the community because it is very important to us that users get a real sense of ownership with the product we are building - and have an influence over our continued decision making."

Using Tangler in this way, Saad says, is a way for Faraday media to contribute to the development of Australia's IT industry.

"I think that without supporting start-ups who are building left-of-centre products, and who are trying to innovate in a new field, we in effect suffocate grass roots innovation and the chance to have the YouTubes and Facebooks of the world.

"As a start-up ourselves, we want to innovate and be disruptive," he says, and hopes that some CIOs feel the same.

"It depends on how you see your role as a chief technology officer," Saad says.

"Do you see it as keeping the work-stations running? Or do you see it as finding competitive advantage anyway you can and finding a way to out-innovate the competition?"

Starting up open source

De Bortoli Wines' information technology manager Bill Robertson believes that working with an established company as it opens its first Australian office can be similar to working with a start-up. "A lot of the things we do with open source are like working with a start-up," he says.

One of the company's open source projects has seen it adopt the Pentaho business intelligence package.

Robertson says De Bortoli was the first Australian company to implement this software. "We have had to crystallise Pentaho's Australian agency," he says. This is done by explaining to the vendor the kind of structures and service that the company needs to adopt its wares with confidence.

The amount of hand holding involved, Robertson says, has made the process of acquiring and implementing the software akin to working with a very young company.

"Those are the complexities," he says, adding that a lack of peer support is another negative that has come from working with the company at this early stage of its Australian efforts.

On the upside, Robertson says the costs of working with an open source vendor entering the Australian market are potentially far lower than those associated with other companies, while the competitive advantage that comes from being the first user "can mean we are well ahead".

Robertson also believes that working with the company early may well mean a deeper partnership is the result, because a start-up software vendor's structures are closer to the precise needs of their early customers. "You can have more control if you get in early," he says. "There is a chance to influence outcomes because you are a key customer from an early stage."

© Fairfax Business Media

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