By Emily Allender / 1 Jul 2020 / Topics: Procurement Software
Your team suspects there could be redundancies in your purchasing, opportunities to renegotiate a better contract or even a new company out there that could do a better job. However, your team is so consumed with managing current relationships, they don’t have the time to pinpoint and exploit these opportunities.
If this rings a bell, it might be time to consolidate your IT vendors.
According to a survey by Tech Pro Research, 47% of respondents are managing more than 10 vendor relationships. Vendor consolidation involves lowering the number of external companies your business works with. It stops the spread of spend across a large number of vendors and instead, focuses funds on a small, thoroughly vetted list of approved companies.
There are many benefits of simplifying your IT vendor management, such as increasing your purchasing power and strengthening your relationship with these select partners.
When you work with a large number of vendors, your spending is spread out across those companies, contributing to small or low-sum purchases with each vendor. Consolidating into a short list of partners increases your investment amount with each company and, consequently, increases your value to that partner.
With such an increase in order volume and spend, your relationship will come to mean more to the vendor. You can then leverage your newfound purchasing power to negotiate better contract terms as needed. And as a higher buying customer, the vendor could be more apt to extend cost savings you weren’t privy to before.
Working with ten vendors also involves dealing with different freight companies, procedures and costs. Usually, when you purchase from that many vendors, you’re paying far more in shipping costs than if you only bought from three.
Vendors aren’t simply companies you work with — they’re relationships to be cultivated.
You may be buying hardware and software from a vendor now, but if they have IT service offerings, they could become much more than just a place to purchase assets. As your business grows, its needs will change. Having the right vendor relationships in place means having a true business partner to help your company succeed.
Imagine undertaking an international expansion. Now let’s say you have a longstanding relationship with a vendor that has global capabilities. As you expand into foreign markets, that company could serve as an extremely valuable asset that helps in your expansion.
But when your internal team has too many vendors to manage, they’re not able to properly cultivate these partnerships. If you have, say, ten vendors, but only two people to manage those relationships, your team can quickly become overwhelmed. Instead of a business partner, your vendors become just another company you order from rather than a relationship with potential benefits beyond your current purchases.
Trimming the number of vendors used by your company frees your team to focus less on the menial tasks and more on the big picture.
When you look at your current list of approved vendors, you’ll likely find some that are trustworthy, competent partners — and some that aren’t.
Improving your IT vendor management includes thoroughly reviewing your vendor list and weeding out the subpar contenders. You should evaluate their cost-effectiveness, efficiency and customer service, as well as their current and potential capabilities.
The Tech Pro Research survey revealed the top pain points when working with vendors include:
Upon completion of your vendor list evaluation, what’s left is a select group of vendors that have proven they can be trusted with your business. Pruning your list often results in an immediate increase in the quality of your vendors and a higher satisfaction rate among your own workforce.
Each vendor you purchase from has their own set of protocols, processes and platforms they use. This often means that employees must be trained on multiple interfaces.
Not only is this another time suck for your team, but what happens when someone leaves your company and they were the only person who knew how to navigate several of your vendor platforms?
Fewer vendors means fewer separate processes for your team to go through — and greater familiarity with the processes that they do.
Once you decide to consolidate your vendors, how do you decide who’s the best of the best?
The first step is looking at past interactions with each vendor. Ask your internal teams if their customer service is up to snuff, if they deliver on their promises and if your company is receiving competitive pricing. If it's not a mutually beneficial relationship right now, dropping that vendor from your list.
Ideally, you should also appraise potential vendors not just on what they can do for your business today, but how they can help you meet your future goals. Keep companies with the ability to scale as you do, especially in a global capacity. Even if your business isn’t in international markets yet, it may be someday and you’ll need vendors with a global presence to support that expansion.
Since you’re depending on fewer companies, each vendor that makes the cut should be able to provide multiple services. Many companies that began as just value-added resellers have expanded their capabilities to include a variety of IT services.
If large-scale IT transformation, digital innovation initiatives or the integration of emerging tech is in your future plans, look for a partner with holistic end-to-end IT capabilities. This new breed of IT providers, known as a super solution integrator, is a single team with expertise across all aspects of modern IT solutions. A super solution integrator can provide a full-scope of IT services from procurement and software licensing to solution implementation and management.
It’s easy for your list of approved vendors to get out of hand. Over the years, you may quickly need specific assets or services and end up going with a vendor that you didn’t take the time to properly vet. Then one day, you realise you’ve spread your spending out over a dozen vendors that aren’t doing as much for you as they could.
These days, optimisation is the name of the game. IT has become a vital component of every business and your organisation can’t afford to waste time and money with a dozen, subpar vendors. Consolidating into a small, well-vetted list will help your business maximise the benefits of working with the businesses that make the cut.
