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9 Reasons Why Strategic CIOs Love Startups

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It seems there is a new article almost every day talking about how CIOs and IT departments are fighting to maintain relevance in our changing economy and technology landscape. A recent Harvard Business Review post titled "Avoiding the Schizophrenic IT Organization" highlights the two opposing forces in today's IT departments. On one side there is a need to run complex, global infrastructure that is compliant and secure, and on the other side there is a need to provide IT value quickly to users. There is constant pressure for IT to provide value and innovation at light speed that supports the necessity of startups and the innovative products that startups bring to market.

For CIO's of both large and small organizations the cloud has been a transformational megatrend. Some CIO's (and CFO's) prefer the cloud, because it allows them to shift more IT spend to OpEx and preserve CapEx for strategic IT investments. Other CIO's like that the cloud is easy to access from just about any device and that cloud applications are easy to deploy, particularly in comparison to traditional on-premises applications. Startups take full advantage of the cloud, because it allows them to develop new products quickly and at low cost, while avoiding significant infrastructure investments. Many startups run their businesses fully on the cloud using commercial cloud applications that are readily available on application ecosystems like Salesforce.com's AppExchange. These same startups design and build their own products on a cloud platform like Amazon Web Services (AWS) or Google App Engine. If the founders of startups are leveraging the cloud to run their business for both internal IT, and product development, then CIO's can do the same thing.

At Enterasys, we have a long tradition of investing in startups and small businesses. We remember becoming a Salesforce.com customer in 2003 and since then we have demonstrated a rich history of collaborating with nimble and customer focused innovators. It is also rewarding for us to partner with startups that successfully go public like Marketo - a wonderful marketing partner for us. Today, we are partnering with some of the best technology startups to grow our business - see graphic below.

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There is no better time for CIOs to embrace and introduce innovation into their companies as today. But CIO are also responsible for business continuity and efficiency, so there they have to balance risk against speed, efficiency, cost, and other factors. Experienced CIOs that were once unlikely to move mission critical applications like email, CRM, and ERP to the cloud are making massive shifts in vendors and products to go 'cloud'. Even so, in some companies, there is too much risk to move core systems to the cloud. In our own business we love the cloud, but ultimately we will always have a hybrid IT environment, because certain applications are too costly or difficult to change. This is where startups can be a huge asset to a CIO's application portfolio. Startup's offer innovative, cost effective technology for every nook and cranny of IT. Whether it is Identity and Access Management (IAM), Analytics, Social, Collaboration, Advocate Marketing, Expense Reporting, or Supplier Management there are many innovative solutions that can be deployed to users with little risk.

Strategic CIOs recognize that the "I" in CIO is no longer about information alone, but it also means innovation, implementation, integration, intelligence and imagination. Strategic CIOs are nimble and adaptive and are best suited to champion digital business transformations that leverage technology to increase revenue, profitability and customer delight. But to do this, CIOs must not ignore small businesses and startups. Here are the 8 reasons why it makes sense for CIOs and CTOs to invest in startups.

  1. Leverage for Optimal Price and Value - Working with startups can be part of an effective technology and vendor management strategy. Medium and large companies have a lot of leverage when negotiating with startups. As a result, startups are often willing to aggressively discount their solutions to get initial customers and to build their client base. In fact part of a well-funded startup's business plans is to acquire a certain number of customers before making money on those sales.
  2. Better Service and Support - Startups have a fighting spirit and a deep desire to acquire early adopters and innovative customers. It stands to reason that they cannot afford to do anything less than provide top notch service and support to their early customers. In many cases you will get dedicated resources that are committed to customer success. We have had great success and built lifelong relationships with Customer Success Managers with numerous startups. For most startups, customer success means something.
  3. Access to Executives - When you work with startup you get to work with some of the brightest, most talented people in technology. As a customer of Get Satisfaction, we've had the opportunity to spend time with their amazing and inspirational CEO Wendy Lea on multiple occasions. We also have had numerous face-to-face meetings with GoodData's CEO Roman Stanek. Both Wendy and Roman are also active CEOs on Twitter and super accessible and incredibly engaging. In another example, Todd McKinnon, the CEO of Okta is building an incredibly innovative and customer focused company. Okta customers have access to Todd, because he makes himself available at events and by his presence in social media.
  4. Faster Development - Startups are usually small, nimble and hungry. These traits manifest themselves in their product development. They are usually agile, lean and incredibly responsive when it comes to development. Product release cycles are usually measured in days, weeks and months, not quarters and years. This is an area that CIO's can leverage the development pace of startups for competitive advantage for her or his business. GoodData has consistently released new functionality once or twice a month and Okta has been consistently releasing new functionality once per week.
  5. Innovation and Disruptive Technology - By their nature, startups usually offer technical innovations. Startups usually begin with an idea and a dream to disrupt the market they are entering. The CEO of Box, Aaron Levie, is a great example of a technology disruptor in the cloud-based file management and file collaboration space. Startups allow companies to gain valuable experience with new technology without requiring a wholesale rip and replace of existing solutions. In addition, most startups take advantage of the latest technology and are often mobile friendly from the start. G2Crowd and Ray Wang from Constellation Research Group are disrupting traditional analyst firms through technology and fresh insight.
  6. Integrations and App Ecosystems - Many startups begin their life in ecosystems like the AppExchange or the iTunes App Store. These app ecosystems provide built-in marketing, customers and a defined go-to-market structure that can lead them to quick success. The ecosystems make it easier for CIO's to identify viable new vendors and see what other users are saying about these companies. Another benefit of startup ecosystems is that many applications are pre-integrated with many common applications. Just look at the thousands of the applications that integrate with Google Enterprise, Salesforce.com, Box, and Evernote as an example.
  7. Joint Product Development - With a little investment of time, CIO's can be active participants in the startup's roadmap. This is like having extra, high quality IT resources building features and functionality just for your business needs. Large vendors, by contrast, will not and often cannot, allow a single customer to define product features and the product roadmap.
  8. Co-Marketing - Anyone that has worked in the IT industry knows that good vendors love to promote their customers. Startups are especially adept at giving their early customers exposure in the broader IT industry. Startup customers can use this exposure to promote their company and their personal brand. For example, customer conferences such as GetSuccess (Get Satisfaction), Inspire (Coupa), BoxWorks (Box), and OKTANE (Okta), all heavily featured their customers sharing best practices and success stories with their peers. These sessions are almost always the most sought out and beneficial sessions in the entire conference. Large companies promote customers too, but to get the attention of a large company you may have to rely on a bit of luck.
  9. Culture - The reality is that many startups, or small businesses, have awesome cultures. They are incredibly customer focused and there isn't much bureaucracy to get in the way of doing the right thing. Startups have highly committed, engaged employees that want to go to work every day. They know how to have fun. For these reasons, it can be very enjoyable and rewarding to work with a good startup. Plus, they usually have beer on tap in their office!
We at Enterasys are very proud of our continuing support of small businesses and startups. Do you have other technology startups that you would like to celebrate? Please share with us so that we can learn from you.

This blog was co-authored by Benjamin Doyle, Vice President of Sales Enablement at Enterasys.

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