What would you do if your ISP went bankrupt and pulled the plug on your T1 line—without a moment's notice? Mike Nikolich, CEO of public relations firm Tech Image Ltd., was on the golf course with his executive team when his media relations manager called to give him the bad news. "My initial reaction was to shank the next five tee shots into the water on the 8th hole and swear like a longshoreman," he recalled. "I was absolutely shocked this happened and completely unprepared to deal with the problem."
Preliminary reports after this summer's historic blackout indicated that businesses in New York City alone lost over $1 billion—and that was in a mere 26 hours. Imagine the staggering losses you could face if one of your mission-critical technology vendors disappeared into the night. How long would it take you—and what would it cost—to find and integrate a new supplier?
Smaller businesses are more likely than large corporations to be hit. If you're a major national bank and your online interface goes out for a day or two, you'll garner some bad PR, but customers most likely won't leave in droves. And you'll have the connections—and the capital—necessary to get back up and running quickly. But if you're a relatively young, budget-conscious upstart—even if you're the success story in your industry and even if all your press till now has been positive—how long do you think you'll last if every e-mail sent to your company is hard bouncing? Or your long distance carrier disappears? Or the primary sales channel for your flagship product packs up and moves out overnight?
You get the picture. Disaster lurks in every corner, particularly when you're dealing with technology vendors and suppliers. Industry analysts at Gartner predict that by mid-2004 fully half of the IT companies we think of as stalwarts will "merge, change direction, or cease trading." And no matter how close you are with your vendor, do you really think you'll get a phone call warning you to seek out other options "just in case"?
Risk analysis is not enough
Assessing vendor and supplier health goes beyond risk analysis. Yes, you need to carefully evaluate your vendors before you choose them, but good companies can and do go bad. If you don't constantly evaluate your mission-critical providers, you could be the next vendor to fade away into darkness.
You need a backup plan in place. Keep your research up to date and reassess your needs—and companies that might be able to meet them—regularly. Certainly, you should keep in touch with your vendors as often as necessary to remain apprised of their market health.
Most vendors will balk if you try to insert language into their service agreement that mandates they give you 60 days' notice of their intent to shut down. Think back to your job-hunting days and get ready to negotiate. Go in asking for 120 days' notice. When they resist, offer to cut it to 90, but stress that this is a deal-breaker. You can "settle" for a 60-day notice, which should afford you plenty of time to put your contingency plans into place.
But don't get complacent and wait for the notice to arrive on your desk before you do anything. Agreement or not, many a desperate company has been known to bend the rules a bit, believe it or not.
What you don't know can hurt you
One IT manager (who requested anonymity) revealed that he worked for a major ISP for eight months. The company's dark secret was that the money had long since dried up, and, without massive infusions of new customers, they'd collapse. Big-name clients who had been guaranteed as much as six months' notice were lucky if they got a phone call the day the company officially declared Chapter 11. By that time, of course, service had been down for over three weeks. Employees knew that if they talked too early, they'd be unceremoniously booted. The need for one last paycheck kept them mum. "I still wake up sick over it," said the IT manager. "I quit a few weeks before the end, and I called three smaller companies to give them a heads up, but I could have done more."
Nikolich, who has since stopped taking his cell phone to the golf course, had to think fast. Ironically, he had been considering employing a redundant Internet connection just two months prior to the crisis. He was, therefore, more prepared than he otherwise might have been—he had a well-researched replacement provider lined up. But he couldn't make the transition completely seamless.
"Back in 2000, a T1 line took about 60 days to install from the initial order. The short-term solution was to have a 56K dial-up router installed while we scrambled to obtain a new T1 line. [Our new provider], GramTel, managed to have our new line installed and operational in about 35 days."
The fallout, said Nikolich, was immeasurable. The Internet is "one of the lifelines" of his business, and he has no way of knowing how many new business leads, opportunities, or editorial opportunities for clients were lost while the company was unable to access e-mail and other Net services.
The new T1 line cost thousands of dollars. But the lessons Nikolich learned were priceless:
Vendor health assessment checklist
Your vendors and suppliers can often be the key to your success—or lead you on the path to fast failure. But what exactly do you need to look for when you're assessing your vendors' financial health and viability? This checklist will help you get a handle on what you need to know about your suppliers.
Before you hire