Evaluating Vendors Like a Library Leader: Part 1 Vendor Stability

Understanding the Framework: 5 Risk Domains

When you're evaluating a vendor, there are five critical dimensions where things can go wrong. This series covers all five, but start here, because if the vendor fails, the other four dimensions don\'t matter.

1. Vendor Stability (this post) — Is the company financially healthy enough to keep operating?
2. Contract & Data Terms (Part 2) — What happens to your data if the vendor disappears, and what obligations bind you both?
3. Service Quality & Support (Part 3) — Does the vendor actually provide what they promised, or are you on your own?
4. Integration & Lock-In (Part 4) — Can you move your data to another vendor if you need to, or are you trapped?
5. Equity & Mission Alignment (Part 5) — Does this vendor\'s business model support or undermine your library\'s mission?

Most libraries skip the stability assessment because it feels too hard, too speculative, or not their responsibility. It absolutely is your responsibility. A vendor failure costs more than a bad contract clause or mediocre support ever will.

The Question: Is This Vendor Financially Healthy Enough to Keep Operating?

You\'re not trying to predict the future or do financial analysis at an investment banker\'s level. You\'re answering one question: does this company have enough revenue, stability, and market position that they\'re likely to still be here and solvent in 3, 5, or 10 years?

Red flag vendors to avoid:

• Venture-backed companies burning cash with no clear path to profitability (they need to be acquired or go public, and when they do, customer support is usually the first thing to get cut)
• Niche vendors with only a handful of customers (your library represents 5-10% of their revenue, so if you leave, they're in trouble, which means they get desperate or shut down)
• Companies with a single product line and no diversification (one system fails to gain traction, the whole company fails)
• Private companies owned by PE (private equity) firms (maximum pressure to cut costs, increase margins, and eventually sell or consolidate)
• Long-established companies that have lost market share and revenue (they're in decline and may disappear or be acquired)

Stable vendors look like:

• Companies with multiple revenue streams (ILS + e-resources + hosting + consulting)
• Hundreds of customers spread across many library types (university, public, special, school)
• Clear profitability and sustainable growth (not skyrocketing growth that requires constant capital raising)
• Transparent communication about their business (they're willing to talk about their market position and strategy)
• Long-term committed leadership (founder is still involved, or stable management team with tenure)

Why This Matters: Vendor Failures Are Catastrophic

In 2019, a mid-sized ILS vendor suddenly announced they were ceasing operations in 90 days. They\'d been in business for 23 years. Nobody saw it coming because the vendor hadn\'t disclosed their financial problems. By the time customers found out, they had 12 weeks to migrate 20+ years of catalog data to a new system while their business was in chaos.

This wasn\'t a small library\'s budget problem. It wasn't a 2-person IT department struggling with technical implementation. It was an existential crisis: "Where does our entire patron record database go? Who has access? Can we recover it?"

The costs weren't just financial, though those were real:

• Data recovery and migration: $50K-150K depending on system complexity
• Staff time on migration: 3-6 months of everyone's work (reclassification, re-cataloging, data validation)
• Emergency licensing for a temporary solution: $10K-30K
• Business interruption: Weeks where patrons couldn't search the catalog or renew books, staff had to do manual workarounds, services were degraded
• Lost opportunity cost: Projects that were planned got postponed. Budget that was allocated to growth got allocated to crisis management

But the real cost was organizational trauma. Staff got burned out. The director had to explain to the board why the library had signed a five-year contract with a vendor that disappeared in two. Board members who had signed off on the deal looked bad. Trust in leadership eroded.

And here's the thing: this was foreseeable. If someone had asked the hard financial questions before signing, the warning signs were there. The vendor was losing customers, had revenue declining for three consecutive years, and was being acquired by a private equity firma classic sign of distress.

What to Evaluate: Company Financial Health, Market Position, Team Stability, References

1. Company Financial Health: The Real Questions to Ask

You don't need an MBA. You need answers to these questions. Make them non-negotiable parts of your vendor evaluation process:

• "How long have you been in business?" — Less than 5 years: higher risk. 5-15 years: moderate risk. 15+ years: lower risk (but not zero).
• "Are you profitable?" — Get a yes or no. If they dodge or say "we\'re investing in growth," that\'s a flag. Profitable companies say yes. Loss-making companies change the subject.
• "Who are your main customers, and how many do you have?" — If they name 5 big universities and 2 public library systems as "most of our customers," they\'re not diversified. If they have 300+ customers spread across types, that\'s more stable.
• "What percentage of your revenue comes from software licensing vs. other services?" — If 90% of revenue is from your ILS and nobody\'s buying your new analytics product, they\'re vulnerable to being disrupted.
• "Have you been acquired, merged, or had significant ownership changes in the last 5 years?" — Yes = higher risk of business model change. Ask what changed.
• "How do you fund the company? Are you venture-backed, bootstrapped, or corporate-owned?" — Get the real answer. Venture-backed companies are obligated to show exponential growth or they die. That's not stable.
• "What's your annual customer retention rate?" — Above 90% is good. Below 85% is a warning sign that customers are leaving for a reason.
• "Have you had any layoffs, leadership changes, or departures of key people in the last 18 months?" — These happen in stable companies sometimes, but the pattern matters. Three leadership changes in two years = trouble.

Most vendors will answer some of these questions directly. Others will give you non-answers ("We\'re growing at an exciting time"). When they dodge, that\'s the information you need: they're hiding something.

2. Market Position: Is the Vendor Growing or Declining?

Do 30 minutes of public research:

• Google the vendor name + "layoffs" or "acquisition" or "bankruptcy". Read the tech news sites (if it\'s big enough to matter, it\'s been covered). Set up a Google Alert for the vendor's name.
• Check Crunchbase, LinkedIn, and company websites for funding announcements. If they\'ve raised five rounds of venture capital and are now trying to raise a sixth and getting rejected, that\'s a pattern.
• Look at job postings. Are they hiring aggressively? That usually means either growth (good) or replacement (people are leaving). If you see the same senior positions posted repeatedly, people are quitting.
• Read their job reviews on Glassdoor. Glassdoor reviews are sometimes exaggerated, but if 40 recent reviews say "toxic culture" or "no work-life balance," that's a pattern. High turnover at a vendor = instability.
• Check their social media. Dead Twitter account and no updates in a year? Check. Company updates product roadmap quarterly? Good sign.

3. Team Stability: Can They Keep the Lights On Without the Founder?

The riskiest vendors are those where one person carries all the knowledge or all the relationships:

• Who\'s the CEO, and when did they start? — If it\'s the founder and they\'ve been there 15 years, that\'s good. If it\'s the fifth CEO in eight years, stability is questionable. If the founder just left and the board is "searching for a new CEO," that\'s a problem.
• "Who's on your executive team, and how long have they been with the company?" — Get names and tenure. Average tenure of 5+ years = stable. Average tenure of 2 years or less = people are leaving.
• "Who\'s the head of product, and do you have a product roadmap published for the next 18 months?" — If they don\'t have a clear roadmap or if the product team keeps changing, you're taking on risk.
• "How are customer support decisions made? Is there a dedicated support team, or is it ad-hoc?" — Ad-hoc support = when the vendor cuts costs, support disappears.

The worst case: A solo founder who's the only person who understands the entire codebase. If they leave or get hit by a bus, the company is in trouble.

4. Customer References: Ask the Questions They Don't Want You to Ask

Vendors will give you references, and they'll give you their best customers. Call them, but ask the questions that matter:

• "Would you choose this vendor again if you were starting today?" — If they hesitate or say no, that's a problem. Listen for honesty.
• "What\'s the vendor\'s response time when something breaks?" — If the answer is "we usually wait 48 hours," that's not good.
• "Have there been any significant platform changes, outages, or migrations since you started using them?" — How did they handle it? Did they communicate? Did they support customers?
• "Has the vendor's pricing changed? Have they added new required fees?" — Stable vendors maintain pricing. Vendors in trouble start nickel-and-diming.
• "Have you ever had concerns about their financial stability?" — This is direct, and most people will answer honestly.
• "How much notice do you think you'd get if the vendor had to shut down?" — If the reference is a large customer, they might know about financial trouble before public announcement.
• "Would you sign a multi-year contract with them again, or would you prefer annual agreements?" — This reveals confidence level.

Ask at least 3 references. Better: ask for references from different library sizes. A reference from a large academic library might not tell you about the experience of a 2-person public library.

Red Flags That Matter (And One That Doesn't)

Red Flags That Are Real Warnings

• Repeated customer retention problems: "We\'ve had some customers leave in recent years" is normal. "We\'ve lost 20% of our customer base in two years" is a catastrophe waiting to happen.
• Unclear or evasive answers about profitability: Profitable companies say so. Unprofitable companies dodge the question.
• PE (private equity) acquisition with no change management plan: "We were acquired by PE two years ago" = pressure to cut costs and increase margins = support and quality often decline.
• Single product dependency: "Seventy-five percent of our revenue is from our ILS, and nothing else is selling" = vulnerability.
• Misalignment between market hype and paying customers: "We\'re getting lots of press coverage, but our actual customer base is small" = hype isn\'t converting to real business.
• Excessive turnover at senior levels: More than one VP-level departure in 12 months = trouble brewing.
• Customer concentration risk: "Our top three customers represent 30% of our revenue" = if one major customer leaves, you're in trouble.
• Inability to name paying customers (only prospects): If they're in pitch mode to everyone and not closing deals, their cash runway is limited.

Red Flag That\'s Overblown: "They\'re Venture-Backed"

Venture capital isn\'t automatically a sign of instability. Some VC-backed vendors are stable, profitable, and growing sustainably. But here\'s what VC actually means:

• They're obligated to show exponential growth or return capital to investors
• They have a limited runway (typically 18-36 months) to prove the model or raise more capital
• Exit pressure is real: they'll either sell (and business models often change), go public (and focus shifts to shareholder value), or shut down

So VC-backing isn\'t a disqualifier, but it does mean you need to understand their growth trajectory and exit strategy. Ask: "What\'s your path to profitability? When do you expect to be cash-positive?" If they can\'t answer, they\'re burning capital and hoping to exit before the money runs out.

Mission Lens: How Vendor Stability Affects Equity and Vulnerable Populations

Vendor failure doesn't just disrupt the libraryit disproportionately harms the patrons who depend on the library most.

Who gets hurt when a vendor disappears?

• Unhoused patrons — They depend on the library for the one constant, reliable access point. If the catalog is down for weeks, they lose that access.
• Patrons who can\'t afford home internet — They\'re coming to the library specifically to search the catalog, check email, access digital resources. Downtime costs them mobility and opportunity.
• ESL learners — The library is often their primary source for language learning materials and digital services. A system outage extends their learning disruption.
• People with disabilities — If the library has accessibility-dependent services from a vendor (digital format conversion, accessible digital collections), a vendor failure means loss of access.
• Lower-income families — If the vendor failure leads the library to cut hours, staff, or services to recover, lower-income families lose their safety net first.
• Incarcerated people using library resources — If a vendor manages digital access for jail/prison patrons, their access is completely disrupted.

This is why vendor stability assessment is a justice issue, not just an operational one. A financially unstable vendor doesn't just cost the library moneyit costs your most vulnerable patrons the services they depend on.

When evaluating vendor stability, ask yourself: "If this vendor disappears tomorrow, which of my patrons suffer the most? How can I reduce that risk?"

That's your equity lens. Use it.

How to Use This in Practice: The Vendor Stability Scorecard

When you're evaluating a vendor, use this scorecard to capture your findings. It\'s not a final verdictit's a structured way to make sure you ask the right questions.

Scoring: Mostly green = proceed. Mix of green and yellow = ask more questions and monitor. Red flags + yellow = pass on this vendor or demand significant contract protections before proceeding.

What You Need in Your Contract (Because Part 2 Covers This)

If you\'ve done a stability assessment and the vendor looks solid, you're not done. You still need contract protections in case your assessment was wrong or circumstances change. That's the next post in this series: "Evaluating Vendors Like a Library Leader: Part 2 Contract & Data Terms."

For now, know this: Even stable vendors can fail. Your contract needs to protect your data and define what happens if the vendor disappears. More on that in Part 2.

The Bottom Line

Vendor stability assessment is not optional. It\'s not a luxury for well-funded libraries. It\'s a baseline risk management responsibility for every library leader.

When you're evaluating a vendor, ask the hard questions:

• Is this company profitable, and can they sustain operations?
• What's their customer base, and is it healthy?
• Who leads the company, and are they stable?
• What do their current customers say about confidence in their future?

If you get evasive answers, treat that as data. It's telling you something.

And remember: vendor failure is catastrophic for vulnerable patrons. This isn\'t just an operational assessmentit\'s a justice decision.