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When Vendors Go Bad
10 March 2009, by , in Data Management, 3 comments

Last week while speaking at the Canadian Society of Association Executives, I had ocassion to meet two women from an association that had recently purchased a new AMS from a vendor in the US. They had invested over $40,000 with the company, and at this moment, the company seems to be insolvent (e.g., they’re not returning calls, no communications, no apparent CEO, all staff have been furloughed).

The women wanted to know what they could have done differently to avoid choosing a company that ultimately went bankrupt and delivered no product. The answer is: not much. If you’ve done your due diligence (e.g., checked references, chose a company that has been in business for more than five years, etc.) and the company still goes bankrupt, I’m not sure what else can be done. Sometimes businesses go out of business (which is even truer in today’s economy).

So the focus here isn’t really preventive but prescriptive. That is, what can you do to prepare yourself for the worst case? As it happens, David Gammel at High Context Consulting has a post addressing some of these issues.

One more thing I would add to David’s list is this: Be sure that all of your business rules and procedures are documented. Even if they are documented using the software that you may lose access to, having the rules and procedures documented will give you a head start if you need to change vendors quickly.

I once had a client that got into a billing dispute with their vendor and was ultimately cut off from their AMS product. But with my help they were able to switch vendors within six weeks, in part because we had documented many of their rules and procedures.

Don’t get caught by something out of your control. If your vendor can no longer provide you with service, you need to have a plan for moving, and moving quickly.

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3 Comments on "When Vendors Go Bad"

Robert Miller, EVP Avectra - 13 March 2009 Reply

I want to make one suggestion to help mitigate this issue. If you are engaged in the purchase process, you should request that your vendor provide you audited financials from the most recent reporting period and year-to-date unaudited financials. In addition, I think it is reasonable to occasionally ask your vendor to provide updated financials as the length of your relationship continues – especially if you are prepared to further invest in the company. This will not protect you from all the unexpected issues, but you may be able to identify a pattern early giving you more time to plan.

Mike Bishop, AssociationServer.com - 19 March 2009 Reply

I would like to reinforce the importance of keeping your "Plan B" up to date. For Saas, your "Plan B" can easily be facilitated as an extension of your disaster recovery plan. Your vendor should provide you with supplementary hosting options that will provide months (years?) of uninterrupted continuity while you search for your next AMS system and/or provider.

Wes Trochlil - 19 March 2009 Reply

Great thoughts from both Rob and Mike. If a vendor balks at discussing long-term continuity, that may be a red-flag.

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