The prevailing belief in the Polish IT sector is that the biggest threat to small businesses is a lack of customers, a difficult market or rising costs. Meanwhile, it is increasingly apparent that the real threat may be a single unexpected claim – often with a value representing a significant portion of annual turnover.
Priceless protection
Stories like this one are repeating themselves with increasing frequency. A small software house, employing twelve people and generating about PLN 2 million in revenue annually, suddenly receives a claim for PLN 250,000. The problem is that the company has no coverage to take on the burden, even though the premium for a policy with adequate coverage would be a mere PLN 2,500 a year. The result? Big problems and loss of liquidity.
These are not cases involving large corporations, but rather agile, specialized companies that do their jobs well and have a good reputation with their customers. However, many of them live in the belief that they are “too small for anyone to sue.” Unfortunately, the market does not take into account the size of the team. The key is whether the project delivered value to the client in line with their expectations. And if it hasn’t – questioning quality, delays or arrangements written into the contract is standard practice today.
Claims are getting bigger – and they are increasingly going to small businesses
Claims of hundreds of thousands of zlotys are increasingly common among companies with 10 to 40 employees. Added to this is foreign jurisdiction, and with it legal fees that can exceed half of annual wage costs.
Available market analysis, as well as the practice of claims handling in the IT industry, point to three clear trends:
- The average value of claims against IT companies is steadily increasing, especially in projects for foreign clients,
- claims increasingly exceed the annual revenue of a small software house,
- the vast majority of disputes arise from discrepancies between the client’s expectations and the literal wording of the contract – not from technical errors.
It is these discrepancies that become the source of the greatest risk for small businesses.
Examples from the market – real, not theoretical
In recent months, we have noted such cases, among others (each company employed fewer than 50 people):
- A claim for $480,000 resulting from an integration error that caused data loss – the policy covered the entire amount,
- a claim for PLN 1.3 million for a delay in a SaaS project for a foreign client – without insurance, the company would not have been able to cover even the first tranche of the settlement,
- security incident, which cost the company PLN 260,000 – the annual insurance premium was PLN 4,500.
Any of these situations could have ended in the demise of the company had it not been for properly selected protection.
Small software houses have the same risks as big companies – but not the same reserves
Small and medium-sized IT companies today operate in an environment of the same contractual requirements as large players. The difference is that they do not have the financial cushions to bear unplanned costs of several hundred thousand zlotys. At the same time, they often serve the most demanding customers – especially foreign ones, who have high expectations and clearly defined complaint procedures.
Why is insurance not a cost – but an element of elementary operational security?
In today’s market, companies that never make mistakes do not win. That’s impossible. What wins are those that have a margin of safety in case something goes wrong.
The right policy, then, is not just another cost. It’s a financial firewall that determines whether one unpleasant e-mail will topple your company – or become just another issue that you settle with your insurer and go back to work the next day.
