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Boutique Vendors Can Bring Big Value

Written By: Olin Thompson
Published On: April 23 2002

What Is A Boutique Vendor?

What is a boutique vendor? It tends to be small and highly focused. It is typically very strong in its chosen area. It will often prove to be the solution with the greatest source of value. These qualities make it worthwhile to expend the effort of looking at boutique vendors that focus on your situation.

Defining Focus

Focus is an overused term. Software and services vendors use it so much that it is often meaningless. Focus is not a PowerPoint slide, a brochure or a web page. Focus is about how the company organizes its business to bring value to specific situation. Focus is as much a decision by a vendor on what they will not do as it is a decision on what to do. Focused vendors avoid business that falls outside their declared focus; they see it as a distraction.

Focus is in the eye of the beholder. To the boutique vendor, it defines its market opportunity. To buyers, it defines their business situation. Vendors generally define their market in three primary areas.

Function - A vendor may provide solutions to a well-defined business need. For example, e-business or analytics or supply chain management.

Industry - A vendor may serve only a single industry like manufacturers. More focused company's take it down to a more specific vertical industry segment, like automotive, chemical or dairies. If they serve multiple industries or verticals, they should be very similar industries that share common needs.

Environment - The environment can be the hardware and/or software environment. A vendor may offer solutions that work in single or selected computing environments, for example, extending a specific ERP system.

A very focused vendor may combine two or three of these approaches, for example, providing analytics to defense contractors who use SAP. The more highly defined the vendor's focus, the better it performs for companies who fall into the vendor's area of focus.

Benefits of Focus

The boutique vendor runs their business with a single-minded idea of serving a very well defined market. Management has limited trade-offs on what to do or how to do it. They do not have to trade-off between conflicting objectives or needs that lead to compromise in the satisfaction of any one market.

The boutique vendor relies on companies like you for their success. They must do a good job in your market, that is the only source of income they have. Their success is only measured in bringing value to people like you.

The boutique vendor offers a more intimate relationship. You can meet with and understand how their key executives view your situation, how well they understand your needs, look into their eyes and understand their commitments to you and the market you represent.

Due to a better understanding of your needs and typically a smaller organization, boutique vendors tend to be more nimble and accommodating in meeting customers' needs. They understand issues like seasonality, cash flow, economic cycles, etc. Their relationship with you often reflects these realities.

Their development efforts are directed at meeting the needs of a specific type of customer' s requirements. Your needs do not compete for resources with totally unrelated features and functions. Added functions are not watered down so they meet the needs of many different types of situations. Perhaps most importantly, these products do not suffer "feature clutter". Focused products deliver a practical, high-value list of features that you can use, rather than a popery of non-relevant ones that may be in the way and complicate your use of the system.

A key benefit of focus is the vendor's people. These people are not generalists, but specialists. They know your issues before they show up. They have worked in other businesses, as employees and as representatives of the vendor, in companies that share your situation. They bring meaningful, practical, in-depth experience to your situation.

The boutique vendor brings financial benefits to your situation. Typically the boutique vendor offers higher ROI for a project. Often this higher ROI starts with a lower cost solution. Usually they offer a shorter time-to-value, the period between the decision and reaching the break-even point. Their intimate knowledge of your situation also means they understand how to get value out of the nooks and crannies of your business.

Evaluating Focus

How can you tell if a vendor's focus is limited to marketing hype or is real? A number of test are available, here are a few.

Web site test
Look at the company's web site. Everyone views the web site; it cannot be a positioning statement conditioned by your specific situation, unlike a PowerPoint slide or a brochure. Is your situation discussed on the first page you see? If you are looking for a chemical solution, does the word chemical appear on the first page? If you are looking for product design software, does the term product design appear on the first page? If not, how deep do you need to go into the site before you see these terms. In either case, how many other situations do you see and are they related to your situation? As one large ERP vendor's web site said last year, "We are totally focused on the needs of thirteen vertical markets." Is this focus? No.

Customer test
Look at the vendor's customer list. If you are looking for a specific industry solution, what percent of their total customer list are in your industry? For the portion of the list not in your industry, do they logically relate to your industry in some way? If you are looking for a specific function or environment, what did these customers buy from the vendor - your function or environment or something totally unrelated?

Financial test
The size of the income statement or balance sheet is not the key here. By design, boutique vendors tend to be small. The key to the financial focus test is to validate their market/solution focus. Although these figures may be hard to get, where does the vendor derive its revenue? This may be different than the customer list. Ideally, the vendor is financially reliant on the industry/market/solution you want from the vendor.

People test
Talk to the executives. Talk to the people who you will be working with. Does everyone from the president to the developers to the sales team understand your situation? Do they have meaningful experience? Have they worked with other companies who share your situation? Can they discuss issues related to your situation in a meaningful way? Companies are people so check out the people.

Summary

A boutique vendor has focus and focus is good. Focus can bring value. Take the time to look for and at the highly focused boutique vendors. Test their focus to determine if it is real and if it will yield value. Will a boutique vendor be right for every situation? No, but the right boutique vendor can bring big value.


About the Author

Olin Thompson, a principal of Process ERP Partners, has over 25 years experience as an executive in the software industry with the last 17 in process industry related ERP, SCP, and e-business related segments. Olin has been called "the Father of Process ERP." He is a frequent author and an award-winning speaker on topics of gaining value from ERP, SCP, e-commerce and the impact of technology on industry.

He can be reached at Olin@ProcessERP.com.

 
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