Can a Tech Company Be Too Big To Fail?

Setting political discussions about government bailouts aside, when exactly is a company too big to fail? From a purely business perspective, the answer is never.

In fact, there is a daunting list of once-dominant companies that rested on their laurels only to see innovative new companies pass them by for good. Netscape, Nokia, Novell and Blackberry to name just a few. And it may have taken a YouTube clip from The Onion to wake the elderly Hewlett Packard into rethinking its brand.

Brand recognition, market share and a broad installed base are significant assets, but even they won’t hold off complacency forever. Take SAP, for example. A dominant enterprise software company that failed to capitalize on the cloud opportunity. As cloud challengers emerged with compelling new solutions, SAP’s once assertive offense soon became a game of defense just to keep the installed based on SAP.

It’s hard to grow when you play defense. Worse yet, many customers felt trapped with significant investments in SAP technology that were painful to walk away from in favor of new cloud services. Of the customers SAP was able to maintain, many grew resentful of this, tarnishing its brand halo.

To be fair, SAP did eventually embrace the cloud and today is a solid enterprise software provider, although no longer the dominant player it once was. It’s a poignant lesson to the industry. And the rate of change is only accelerating. Start-ups and new challengers are increasingly punching above their weight class with innovative solutions that deliver more value.

The brand recognition advantage is not what it used to be and with the cloud, switching services is relatively easy, diminishing the installed base asset. The race is increasingly focused on who has the best features within a usable solution that the business can leverage. In other words, it all comes down to value.

We see this clearly in the Workforce Management (WFM) space, where emerging companies are putting the heat on long established industry leaders. In our latest WFM Technology Value Matrix, we see ADP holding its ground whereas Kronos is poised to fall behind. Ceridian has now taken a commanding lead with WorkForce Software keeping pace as well in disrupting legacy players’ turf.

Perhaps the real story lies in how many new vendors are making significant gains in adding value and really shaking up the Matrix. SumTotal and Epicor HCM are both on the verge of entering the Leaders Quadrant. JDA, Workplace Systems, Paycor, Paychex, Paylocity and Paycom are all on track to make big leaps over the coming year.

That’s not to say that Kronos is finished or even faces immediate decline. The good news is that the very same development tools, industry opportunities and ability to add value to the software that is helping its competitors excel is available to Kronos as well. The challenge is to resist relying on strong brand recognition and a solid installed base that were built on the successes of past glory days and to instead recognize the competition and focus on delivering increasing value each day into the future.

But that is the danger of complacency; the shift starts slowly at first then sneaks up on you. Just ask SAP.