How to handle vendor consolidation into the New Year

Looking for a reset after a hard 2020? You’re not alone. According to a survey of executives by McKinsey, the ongoing COVID-19 pandemic has caused organizations to increase their rates of digital adoption. While new innovation may be the result of a temporary global crisis, the consulting firm also found that 75% of people using new technologies plan to continue using them as the transition back to “normal” begins.

As businesses around the world reframe goals and expectations based on this new environment, there’s never been a better time to look carefully at the relationships you’ve built with your software vendors. 

Balancing vendors and functionality

In some cases, to expand tech functionality while keeping processes running smoothly, it may make sense to diversify your list of vendors. However, if you don’t feel you’re getting the desired ROI from your current partners, another option is to look at software replacement and possibly limiting the number of vendors you work with. While there’s no one-size-fits-all solution, in many cases, paring down the number of software providers you work with to a shortlist of quality partners can create efficiencies, cut costs and ease potential IT headaches. 

The benefits of vendor consolidation done right are backed by extensive research. According to this study from Osterman Research, the growing number of applications that are essential for organizations has increased the amount of time spent on IT administration and made scalability harder. The increase has also added integration requirements and made billing and relationship management a headache. Vendor consolidation can address each of these issues. It’s no wonder that 83% of the 121 organizations surveyed stated they’d ideally like to work with as few vendors as possible. 

Simplifying your tech stack isn’t always easy, however. Some of the top challenges identified by the Osterman Research study included the use of legacy software, a bring-your-own-application (BYOA) approach and organizations that were created through a merger.

Ultimately, if you can overcome these hurdles, working with a few partners that provide a full suite of services, like through the IgniteTech Unlimited program, you can go a long way toward meeting your goals. 

Picking the right partners

As with every business process, vendor consolidation necessitates you thinking critically and determining what’s currently working, what needs to be improved upon, and what needs to be scrapped entirely. If you’re working with vendors whose pricing doesn’t match up with the value generated from using their products, there’s a good chance they aren’t delivering positive ROI. It’s critical to balance the functionality you need with the costs associated with the vendor to maximize the value of your partnership.

Effective vendor consolidation is about more than just cutting some of your current partners loose. When deciding if a partner will be a valuable part of your tech stack, consider if they offer each of the following:

  • Price: Ultimately, you want partners who can offer you a great price for their product. Consolidation can help you to increase purchasing power. With a diversified list of vendors, your importance to any one partner is limited. However, by bringing your business to only a few companies, you become an important part of their businesses and increase your own negotiating power.
  • Implementation: If you’re like many organizations, your IT department already has enough on its plate. Vendor consolidation means that your solutions should follow similar processes and work on similar interfaces, reducing “soft costs” like training. Vendor consolidation can also help you reduce IT service headaches, as you can build real relationships with each company. That means your partners should make an effort to be there to assist you if problems arise with their products.
  • Integration: One of the key benefits of vendor consolidation done right is the ease with which you can integrate solutions into your system. Working with fewer providers means your software solutions should be able to communicate with each other and your other tools with greater ease. Look for partners whose solutions fit your larger vision.

Ultimately, it may still make the most sense to continue to work with a vendor that only offers one or two software solutions, if they still provide quality service and each of the above factors. In most cases, however, vendor consolidation will be a more effective way to reduce costs, smooth IT headaches, and increase productivity. 

Software replacement made easy

Your efforts to consolidate vendors will probably involve replacing some of the software that was provided by your less valuable partners. If this is not done properly, it may cost your organization dearly in “soft costs,” such as the amount of time and training necessary for full implementation. Be sure to consider these factors when deciding on the value of a new technology. Often, working with a partner you already use will make implementation far easier, especially if it enables you to integrate with your current programs.