"As an IT manager, are you going to put your reputation on the line that five guys from a small startup in Vancouver are to deliver for your organization," asked Jevon MacDonald, blogger and co-founder at StartupNorth.ca.
It's a question that IT managers at large and medium-sized enterprises alike have faced for years. Those who have avoided venturing to smaller firms cite lack of experience, expertise, and stability as the reasons for staying away. But amidst pressures from employees looking for innovative new ways to do their jobs and C-level executives trying to keep the costs in line, more and more companies might be forced to look at more than just IBM or SAP for their software and services. And according to some industry observers, that isn't a bad thing.
"Enterprises need to be looking at the local startups now to keep them fresh and drive toward the products they need," said Jonas Brandon, blogger and co-founder at StartupNorth.ca. "Large corporations are unlikely to deliver on the needs of other large corporations, so it's the startups that give them the guidance and feedback on their products."
Unlike some of the bigger vendors, small and emerging firms can often deliver a more flexible and responsive solution to the IT manager, according to Kevin Joy, vice-president at online reputation and security vendor Brand Protect - a young company founded in 2001. He said that while larger companies would typically have multiple services portfolios to dilute their attention, most startups are specialized.
"We're better able to respond to the question, 'I have A, but I'd like it in the shape of B," said Joy. "For the most part, the smaller companies are also platform and service agnostic, so they don't necessarily bias what they offer on the basis of what they already have in their portfolio. This means they can often provide a more credible third-party assessment of your situation and provide flexible solutions."
This flexibility also extends to the pricing model, as many younger firms are not tied to large overheads or other cost models.
"Our costs are significantly lower as we don't have shareholders to answer to," said Martin Ostrovsky, co-founder and CEO at Toronto-based startup MonkeyBean Solutions. "We don't have large office buildings to pay for, so we can keep our costs down. The beauty of being a smaller company is that we're not restricted to fixed costs; ours are already entirely variable."
StartupNorth.ca's MacDonald said that technology is undergoing the first software revolution created by users, rather than being adopted by them. He said that IT managers are going to be facing more and more pressure to bring low-cost IT tools - such as technologies based on those being used in the consumer world - into the enterprise.
"CEO types are also going to start demanding these new innovative technologies, because they don't want to look like their organization is getting stale," he said. "Nobody wants to get in front of their shareholders and say, 'SharePoint is on a five-year release cycle for major features, so we're not going to have any new stuff for five years.'
Enterprises now have to start looking at the tech companies on the cusp, because the days of the IT department just saying 'no' to everything has passed."