Should Business Risk Mitigation Be A Factor When We Choose Our Suppliers And Manufacturers?

This is something that I have struggled with for most of my working life. As a technology professional, it is my job to pick the best products and solutions or to dig deeper to marry that technological decision with one that’s best for my organization. Is it incumbent on me to consider my suppliers’ financials, or their country or origin, or perhaps their business practices?

This thought was thrust sharply into focus during the past few months. First, we were reminded that a sound business still needs to have sound financials. The second warning is around the ramifications of a trade war.

Let’s discuss the need for financially-sound partners and suppliers. Time and time again the world is reminded what happens when our partners and suppliers go insolvent and/or go out of business. Companies like Enron, Accenture and Merrill Lynch (Nortel, Avaya, Brocade) have shown us what happens when they don’t. In the IT sector, one of the troubling trends I have been following for years is the growth of tech companies that fail to make a profit for years. They go public and have some sort of cash flow, but in some cases the losses that are accrued over a multi-year period can equate to hundreds of millions of dollars. Every one of us has a choice: Should we continue to do business with companies like that? What is the risk to our companies if a market correction takes place? What if someone actually looks at the business fundamentals and says “enough is enough, companies that don’t make money go out of business?”

This has recently been highlighted by one of the larger ADC players in the IT space who released 2017 financials late, then retracted them, and still has not released amended results. This same company has lost hundreds of millions of dollars since they have been in business and never made a profit. Should it be in our company’s best interest to do business with a company like this because they cost less than a competitor? To put it differently, in 2008 I put thousands upon thousands of dollars into GM stock because although they were losing money, it was GM. I could buy the stock cheap, and let’s be honest, it wasn’t like GM was going to go away. Well, I got cheap stock and I lost every penny. On the other hand, I bought TATA Industries at $2.43 cents (today $18 -TATA always had a sound business and was not insolvent). I think it is incumbent upon us as IT professionals to be pennywise and not pound foolish.

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The other situation I think IT professionals really need to start considering when making manufacturer/product and partner decisions is 1) where does the product come from, 2) where is the company supplying it or manufacturing it headquartered, and 3) where are the components from. This is not something I typically hear much about unless you worked for Huawei. I suspect you haven’t either, but it is now more relevant than ever. “Trade war” is a phrase that most of us hear, but if you’re in the western world have likely not experienced. Only companies that have faced embargoes in the past will understand the devastation that a real trade war can actually cause. I grew up in South Africa and I have seen what can happen when suppliers stop supporting businesses. To those of you who are thinking I’m being dramatic, look no further back than May of this year when the United States government essentially put the second-largest Chinese tech manufacturer in limbo by restricting trade and shipment of key components ( this was not part of a traditional trade war but it was a trade embargo). It was limited in scope and ultimately in duration, but it should force all us to face reality – a trade war can happen. If it does, how will your choices affect your company? If you are U.S.-based, should you buy Chinese products? iI you’re China-based, should you buy U.S. product? Should you buy from a company headquartered in a neutral location?

All too often, when IT professionals make a technology decision we consider several things.  What’s the best technology, the easiest to use and the most cost-effective (Capex and OPEX)?  We don’t consider the wider business ramifications associated with our suppliers’ business practices, headquarters, and financial soundness. However, the world has changed and in many cases the success of any companies is wholly or in part based upon a sound technology foundation. I believe it is time for IT professionals to consider more factors to make business decisions, not just technology choices.

Read “Flexibility Is The Name of the Game” to learn more.

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Daniel Lakier

Daniel Lakier is VP-ADC globally for Radware. Daniel has been in the greater technology industry for over 20 years. During that time he has worked in multiple verticals including the energy, manufacturing and healthcare sectors. Daniel enjoys new challenges and as such has enjoyed several different roles in his Career from hands on engineering to architecture and Sales. At heart Daniel is a teacher and a student. He is forever learning and truly has passion for sharing his knowledge. Most recently Daniel left his role as President and CTO of a leading technology integrator where he had spent the better part of 8 years to join the Radware organization. When Daniel isn't at the office he enjoys working on the farm and chasing his wonderful daughters.

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