How do you evaluate new technology startups to determine which ones might make sense to deploy in your organization? As an entrepreneur, employee, investor, and startup advisor, I’ve found that the answer can vary greatly depending upon objectives and requirements, but there are common criteria. Here are five important questions to consider:
Does the Technology Facilitate the Organization’s Business Objectives?
Typically, the most important criteria for evaluating a new technology is to first determine how it impacts the organizations’ business objectives. Suppose, for example, that an organization’s primary objective is increasing revenues by 30% a year. A new technology that saves them money, but that is less effective at achieving their revenue objective than an alternative higher-priced technology is probably not a good choice.
Startup, Opsera, is flourishing by helping enterprises execute their digital transformation journeys much faster by accelerating software delivery management and DevOps in the cloud. And Theom makes a compelling case that by automatically discovering, analyzing, and securing data, it enables enterprises to focus on their business objectives.
Does the Technology Facilitate the Organization’s IT Objectives?
The organization’s IT objectives, framed within the context of achieving the business objectives, is also an extremely important criteria when comparing technologies. A promising technology, as an example, that does not integrate with an organization’s existing systems or that would require a huge learning effort on the part of the IT staff may not be a good fit regardless of the potential benefits.
Show Me the Money!
The most effective technologies are ones that clearly save you money. This can be demonstrated with a financial analysis – typically ROI or TCO. When I formed my VMware consultancy in 2005, for example, we immediately started preparing ROI analyses for our clients. It was easy to show massive hardware, rack space, power, cooling, and management savings when consolidating 100 physical servers down to six VMware hosts.
Most new technologies, even disruptive ones that can save a great deal of money, are not so easily demonstrated. The upfront cost of Nutanix HCI, for example, may be equivalent to, or even more expensive than, an upgrade of existing servers and SANs, especially if not all of the products required replacement. A multi-year Total Cost of Ownership (TCO) analysis helps even out purchasing cycles and provide a strategic big-picture analysis.
What Does the New Technology Replace?
In some cases, this question is clearly TCO-oriented enabling an easily quantified savings. For example, just as VMware eliminated the need for individual servers and the systems administrators who used to manage them, so did Citrix eliminate the need for individual desktop technicians while Nutanix slashed the requirement for storage administrators. The startup, Remotely, eliminates the requirement for purchasing multiple separate software packages while Horizon3 utilizes software instead of hiring expensive red teaming consultants, and OpenMetal uses private clouds based on open source software as an alternative to the hyperscalers.
Sometimes, you can use external studies to help compare the new technology with the replacement. LightBeam, for example, replaces the pattern matching of older technologies with an AI-driven privacy platform to reduce the likelihood of breaches. The cost of breaches eliminated can be estimated based upon surveys such as Cisco’s 2022 Data Privacy Benchmark Study.
In many cases, the savings can be both in opex as well as customer or employee happiness. One of the use cases Kognitos touts, for example, is the ability to automate and therefore accelerate the PO receiving process. This, Kognitos says, is likely to lead to happier sales teams and more relaxed finance and RevOps. Rather than trying to quantify the value of happier sales teams, it is probably more prudent to simply identify the manual process being replaced and the qualitative benefits enabled.
How Viable is the Startup Itself?
It’s important to know the character and capabilities of the startup. This entails the typical measures of Googling, asking for financial statements, and most importantly – checking references. IT community networks such as HMG Strategy can also play an extremely valuable part by getting real-time feedback and opinions from one’s peers in the industry.
For a very young startup, this may not be easy to do. In this case, look at the founding team. The credentials of the founders including previous businesses and employers, patents received, and industry influence can help you identify particularly promising startups. Tessell, for example, is a DBaaS startup offering a revolutionary data infrastructure and management platform. It’s founders developed some key technology at Oracle and hold over 30 patents between them.
Keeping an Open Mind
I’ve found in over 30 years of selling and buying enterprise IT technology, that all too often a promising startup will look great in terms of the aforementioned criteria, but still fail to make inroads in an organization because of a status quo mindset. For example, the most common objection we would get when selling VMware are the server administrators who insisted, “You will NEVER put my production server into a virtual machine!”
Keeping an open mind to new technologies and the startups that originated them, when supplementented by a rigorous evaluation framework, can help ensure that organizations don’t miss out on solutions that can potentially save them money, or even change their business.
