Deciding Between Large vs Small Software Vendors

The software industry is complicated to navigate. In most cases, when selecting a software vendor, there are many options to choose from, ranging from larger established software companies, to smaller yet reputable companies. When evaluating potential software vendors, it's important to understand the various trade-offs between larger and smaller software companies.

We think that the size of the software company is an important factor to consider when you're narrowing down your search. As such, we make sure to mention the size of the company in each of our in-depth reviews. We make sure to include a mix of both larger and smaller companies in each "best of" list, but in the end, it's up to you to decide which solution is best for your needs.

We'll walk you through the trade-offs of working with large and small software companies, so that you can use this information in your decision making process.

Larger Companies

Building a software business is expensive -- it requires hiring a team of qualified software engineers, a strong support team, and an extensive sales team. If a software company is able to sustain a large number of employees, this is likely to indicate that they're financially stable and have a large client base. This is particularly important because it pays off to select a company that is going to stay around for years to come. If the software vendor goes out of business, it will be very difficult and inconvenient to transition to a new vendor. A large staff may also indicate that the company is more reputable, since it managed to recruit a large number of employees.

Since larger companies typically have the means to employ strong software development teams, those teams are often able to build high quality software, and they will ideally have the resources to respond to customer's feature requests. Smaller companies may get a lot of feature requests from their customers, but they might not have the bandwidth to address all of the important incoming requests. If a larger company has been in business for a long time, then you can be reasonably confident that the product has the vast majority of features that its customers need. However, this also typically comes with a higher price tag.

The downside to an older company with a larger client base is that it may be less likely to make innovative changes to the product, even as the rest of the industry evolves. This is because larger companies (with thousands of employees) also tend to have more inertia, and don't want to create substantial changes that can potentially upset their existing client base. Larger companies would prefer to keep their client base stable and grow it at a steady rate, as opposed to making changes that have higher risk (even if they miss out on a potentially higher reward). For this reason, many software products that have been around for a long time are likely to have dated user interfaces. After all, if there are already many satisfied users, it may not be worth the risk of alienating them by creating a more modern UI that they would have to learn how to use, and which they may not even like.

If a larger company creates a product that it intends to market to multiple industries, then it must create generic features that all users can use. However, this may make the company less likely to develop features specific to your industry. If they did update the software, then they would have to accomodate requests from each of the many markets that they serve, which can mean that the product becomes bloated with features that are irrelevant to your needs, and often more expensive. In contrast, if a product only serves one specific industry, then it can be lightweight, yet have all of the functionality that you need.

Smaller Companies

Smaller companies are inherently riskier, since there is always the chance that they will go out of business. However, they often provide a superior, cutting edge alternative to the big players in their particular industry. It's common for industries to have large companies who became large due to the first mover advantage, and for newer, nimbler companies to come and take away marketshare. The key is being able to distinguish the most promising smaller companies from the rest of the newcomers.

When considering smaller companies, it's crucial to select one that already has an established product with a loyal customer base. You don't want your business to become a beta tester for their product, and help them identify bugs and prioritize new features to add -- that shouldn't be your responsibility as a paying customer.

It's also important to make sure that they have a strong software development team, because without enough software developers, new features will be slow to roll out, and bugs will be slow to fix. Some customers make the mistake of thinking that if the software product is mature enough, the company just needs to maintain it. However, this is rarely the case -- there's almost always additional functionality that users will want, in which case the company will need to have a tech team support those requests.

If a smaller, newer company has a strong tech team, and has gained a substantial customer base through word of mouth, then there's a decent chance that it may be an even better option than some of the larger, more established companies.

If the company is focused in a niche industry, it can provide excellent features that are tailored to your particular specialty. Smaller companies that choose to target a specific industry are often founded by people who worked in that particular industry and recognized a need for software tailored to that industry. Because smaller companies are often led by people who have an in-depth understanding of your specific industry, they may be more likely to develop features that are relevant to your needs, and provide better support when things don't work as expected. In contrast, it may not be worth it for a larger software company to create an industry-specific feature that only satisfies a fraction of the industries that they market to.

Bottom Line

Larger companies are often safer bets, in that you can feel reasonably sure that they'll stay around for years to come, and that they have a product that's currently satisfying many users. However, there are some tradeoffs that come with choosing a larger, more established software company: the technology may be outdated, and they can be slower to make substantial changes to the product, since they already have a product that satisfies their current users. If their product is designed to appeal to multiple industries, it can come loaded with many features that aren't relevant to your specific industry. You may also be paying a higher price tag for all those features, even if you don't need or want to use them all.

Smaller software companies are a bit riskier, but their users may be rewarded with a more lightweight product that's built specifically for their industry's needs, without any extraneous features that bloat the product. As a result, the price point is often lower. However, you have to do your due diligence in order to identify the best up-and-coming companies, since if they go out of business, it will be time-consuming for you to switch to another software system.

At ValuePenguin Software, when we select the top software options in each industry, we make sure to select the best options on the market, regardless of company size. From there, it's up to you to understand the trade-offs between the various top options on our list, and factor details like company size into your decision making process, in order to select the best software for your specific needs.

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