Gartner Research

How to Analyze Vendor Income Statements to Mitigate Vendor Management Risk

Published: 23 November 2015

ID: G00291285

Analyst(s): Gary Spivak

Summary

Understanding the financial viability of vendors and their ability to generate income and fund investments must be part of vendor risk management. To minimize the risk of vendor failure and obsolescence, IT vendor management leaders must review their income statements and plan for alternatives.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Evaluate Your Vendors' and Service Providers' Financial Health Through Basic Financial Statement Analysis
    • What Is the Income Statement?
  • Compare Revenue to Prior Periods and to Competitors to Gauge the Market Share and Trajectory of the Company You Are Evaluating
    • Revenue
  • Understand How the Company Reports Its Revenue to Get a Better Handle on Current and Future Potential Growth Rates
    • Revenue Components
    • Costs Associated With Revenue
  • Look at Gross Margin From a Negotiation Perspective
    • Operating Expenses
  • Look at R&D and Sales and Marketing Expenses to Determine If Adequate Resources Are Being Allocated to Remain Innovative
    • R&D Expense
    • Sales and Marketing Expense
  • Look at Operating Income to Determine the Profitability of Core Business and Operating Efficiency
    • Operating Income
    • Other Income
  • Summary

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