Do you have a clear vendor consolidation strategy?

Vendor sprawl and lack of strategic partnerships can hinder innovation—here’s how to fix it

One of the pandemic era’s lasting legacies is the tsunami of service contracts and niche technology providers it unleashed on the market. As companies looked for ways to avoid sinking into a sea of disruption, they invested heavily in a multitude of solutions and services that helped them do everything from enabling a remote workforce to addressing supply chain gaps to developing digital products for customers.

This approach to excess spending on point solutions and startups helped many businesses stay afloat—and even thrive—in turbulent times. But it has also given IT leaders a bit of a hangover to overcome. As we’ve come out of the pandemic era, today, many are staring at cluttered balance sheets, and a tech ecosystem fragmented into tiny fiefdoms, with small pockets of talent and tech spread too thinly across non-critical projects.

The risks of vendor sprawl

This is what we call vendor sprawl, and it’s much more than just an administrative headache. At its best, it can drown you in paperwork; at its worst, it could mean the difference between success and failure. Significant organizational value can be achieved by clearing the clutter and turning attention to optimizing IT spending. Often, 20 percent of tail-spend is with 80 percent of the vendors—leaving organizations vulnerable to risks, including:

• Security and compliance vulnerabilities: The more extensive the vendor network, the greater the potential for gaps in security protocols and compliance—which increases the risk of data breaches and legal and regulatory issues.
   
• Higher costs: Overlapping or competing services drive higher operating expenses as teams juggle multiple contracts, licenses, support agreements, and other administrative responsibilities. A lack of centralized management and negotiating power can result in missed opportunities for favorable pricing and bulk discounts.
   
• Culture fragmentation: In today’s remote-first work environment, preserving a strong organizational culture is challenging. Adding numerous vendors to the mix can further hinder employee collaboration, communication, and shared practices. Moreover, this isolation can lead organizations to miss out on key capabilities and opportunities due to a lack of coordination.

Simplify your vendor ecosystem

Now’s a great time to thoroughly assess your organization’s vendor ecosystem with an eye toward simplification. But what’s the right approach? How do you balance leveraging the agility and innovation that SaaS solutions and small agencies deliver without spreading your resources too thin across disparate platforms and exposing yourself to unnecessary risks?

Finding the sweet spot requires more than simple cost-cutting measures. At CGI, we advocate a holistic approach to vendor consolidation, ensuring careful alignment of external capabilities and solutions to your organization’s long-term goals and objectives. Before looking at a single contract, we help you look at the big picture—establish your goals and objectives and define success. Get a clear picture of which vendors are doing what, where, and why. We then use those insights to craft a comprehensive strategy that optimizes resources, minimizes complexity, and establishes a logical ecosystem of partners that aligns with your business agenda and delivers ROI.

Next, our approach involves conducting a thorough audit to identify redundancies, areas for potential integration, and opportunities to scale small or bespoke solutions. This will help ensure you have the resources to execute your strategies as efficiently as possible. We have seen the benefits firsthand, working with clients through a thorough assessment process focusing on each line of business’s scope, objectives and preferences, and delivery and proximity requirements to co-create a holistic approach to transition strategy and ongoing global delivery.  

Successful vendor consolidation

The benefits of a holistic vendor consolidation strategy can be viewed through what we call the “three C’s” of success:

• Compliance and risk mitigation: An optimized vendor network allows for a more focused approach to security and risk management, enabling tighter controls over data access and confidentiality. 
   
• Cost savings: Fewer platforms, lower overhead expenses, and better negotiation leverage for service agreements have helped clients achieve savings of up to 30 percent in some cases.
   
• Culture and talent: Stronger relationships with fewer vendors result in better collaboration, shared investment in successful outcomes, and clear alignment to organizational values. A targeted approach also helps clients strengthen their employer brand, which leads to attracting the right talent at the right time.  

In short, now is the time to optimize your organization’s vendor network – especially as companies continue to settle into a new normal in the post-pandemic era. This isn’t just about cleaning house; it’s about focusing on fewer, more strategic vendor relationships that make life easier for your employees and provide the precise capabilities you need to thrive in a digital world.

There are significant benefits to be gained through successful contractor consolidation. CGI’s approach provides the flexibility to calibrate the composition of your teams based on business objectives–scaling between the proximity of onshore teams and the cost-benefit of nearshore and offshore delivery centers. Through a measured approach to prioritizing business objectives, we align to fit the needs of each line of business and work together to drive business value.

Ready to chat about how we can help you create a future-ready vendor ecosystem? Connect with Amar and Andy to learn more.