Saturday, December 20, 2008

Smaller maintenance companies could do well, and hire during recession

MarketWatch runs an interesting report that smaller maintenance companies may be able to take a lot of business from larger software and service vendors (like SAP) during the downturn.

CIO’s are looking to save money in anyway they can, and smaller upstart firms may offer better deals. There is always a question about branding.

The story is by John Letzing, “Amid crunch, a software industry eyes an opening; Small firms offer cheaper maintenance; SAP fee hike stirs customer anger” link here.

This reminds me of the trend back in the 1980s and early 1990s for other vendors to emulate IBM mainframes. Back in the 80s Ahmdahl was popular (Chilton Corporation in Dallas used it for all its credit report processing) and then Hitachi followed on. These mainframes would run MVS in a conventional way but tended to prefer non-IBM database and sometimes telecommunications products (like Datacomm DB and DC at Chilton). But in the long run, IBM won these wars and the competition died out, just as it did with mainframes (like Univac) with non-IBM architectures.

Here, maintenance companies would be maintaining (installing bug fixes) for products sold by other vendors, and that could be challenging work for smaller companies. It’s often hard to maintain something you didn’t write. But a much more challenging financial environment could change these workplace fundamentals.

It also reminds one of the issues that are emerging in the auto industry (and affecting the bailout strategy). Today, major companies use the same suppliers and often same warranty repair services. Despite all the naysaying, it might well be possible to keep all the suppliers and maintenance companies healthy while the lumbering auto manufacturers and unions are forced to restructure to avoid bankruptcy.

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