a critical yet often overlooked category that should examine the financial and management strength of the vendor. Given the huge dollars spent upon and strategic importance applied to most major IT procurements, the financial stability of the vendor supplying the product cannot be overlooked. The vendor viability evaluation section should combine quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can executives accurately assess the risk and benefit of corporate investment in a specific product and vendor. At a minimum, the corporate viability criterion should evaluate the overall financial viability of the vendor, its macro and micro market viability, its sales and marketing viability, its management viability, and its research and development viability. Relative to the other five evaluation criteria, best practice selections place approximately 20 percent of the overall selection importance on the corporate viability criterion.
"Well, first of all, I won't do a bad VC deal", Ned Said. "I don't have to :-) ... and having sat on the other side of that table as a corporate VC myself, I have some idea of what I'm looking at.
But to the larger question of viability, I think we have a pretty good one-two punch answer. First, we're closely held and profitable, and don't have to answer to the kind of often-punitive financial forces that can make other software companies behave badly. But even more significantly, I would say that the best hedge any company can have against the future of its ERP vendor is to have an open source strategy. If the commonwealth of Virginia fell into the Atlantic Ocean tomorrow, taking xTuple with it, our customers and partners would have a leg up on customers of other vendors in a similar situation - they would have the source code to their software, and they would be members of a larger community of users who are actively involved in the support, maintenance, and improvement of that software.
That's the best insurance policy against the ERP Graveyard. After all, how secure were JD Edwards customers - long operating history, $800MM in sales, strong balance sheet. Then they were bought and sold twice in a year. There is no security in working with a big vendor - and in fact, if the vendor's stock is actively traded, there's probably less so.
So back to us - in thinking about scaling up the business, we're only interested in working with investors that share our vision of the marketplace and the larger opportunity. In other words, investors who will give us operational running room, and also add significant value over and above the dollars. If we can attract people like that on good terms, great. If not, that's fine too - it's a big market, and we're pretty comfortable operating under the radar."