In the fast-evolving world of IT and operations, efficiency and clarity are more critical than ever. Yet, many organisations find themselves juggling an overwhelming number of vendors. Each vendor addresses a specific internal need – but their disconnectivity often causes more problems.
This phenomenon – referred to as vendor sprawl – drains resources due to the time spent managing different vendors. It also poses significant risks to security, compliance and operational harmony.
Fortunately, there is a better way. A way to streamline partnerships, reduce redundancies and regain control without compromising on innovation or service quality. This is known as vendor consolidation. Welcome to the concept of vendor consolidation: a strategy that has the potential to revolutionise how businesses approach their IT and tech ecosystems.
This blog will explore its challenges, benefits and actionable strategies to help you take the first step toward an optimised, integrated and secure vendor landscape.
Common challenges associated with vendor sprawl_
Vendor sprawl is defined as having too many vendors across departments causing duplication and inefficiency. However, sprawl commonly happens because of businesses bringing in vendors to address evolving needs over time, without auditing what they already have in place.
In some cases, it can be a result of shadow IT. This is the use of unapproved tools, often stemming from employees or departments seeking quick fixes to immediate needs. These tools often lack integration with approved systems, escalating inefficiencies and data silos.
Unfortunately, once it happens, having too many vendors can cause business problems. These include:
- Integration complexity: Managing diverse systems across multiple vendors can create significant operational headaches. Each system may come with its own requirements, workflows and compatibility issues, demanding extra effort to ensure smooth integration. The lack of seamless interoperability can lead to delays, errors and missed opportunities for process optimisation.
- Inconsistent SLAs: Service Level Agreements (SLAs) vary widely among vendors, leading to differing levels of responsiveness, reliability and support. When critical systems encounter issues, inconsistent vendor performance can introduce delays, impact productivity and make it challenging to uphold service standards across the organisation.
- Budget fragmentation: When spending is scattered across multiple vendors, organisations struggle to track ROI effectively. This lack of financial visibility complicates decision-making, as leaders cannot pinpoint which investments deliver the best value. Fragmented budgeting also makes it harder to identify opportunities for cost savings or consolidation.
- Security and compliance risks: The more vendors an organisation works with, the broader its attack surface becomes. Each vendor introduces potential vulnerabilities, whether through weak internal controls, outdated software or insufficient security protocols. Regulatory compliance becomes increasingly challenging as data moves through various systems, exposing the organisation to potential fines and reputational damage.
- Vendor lock-in: Proprietary systems, exclusive contracts, and high switching costs can trap organisations in vendor relationships that limit their flexibility and innovation. Vendor lock-in makes it difficult to adapt to changing business needs or technological advancements, leaving companies reliant on outdated solutions and unable to explore better alternatives.
At a time when many businesses are seeking to cut costs, vendor sprawls most significant issue is perhaps the impact on expenses. If you’re paying multiple licensing or contract fees across vendors, it’s likely you’re not getting the most value for your money. Moreover, multiple vendors can often lead to creeping costs being ignored, eating into your profitability.
What is vendor consolidation?
If you’re juggling multiple vendors, it’s likely you need vendor consolidation.
Vendor consolidation is the process of reducing the number of external IT and technology suppliers a company uses. It involves streamlining services by selecting fewer, more strategic vendors to cover broader needs. The goal is to simplify vendor management, reduce costs and improve operational efficiency.
Consolidation can apply to software providers, cloud services, hardware suppliers and managed service vendors. In short, it covers every vendor you can need to cover your IT and technology needs.
Through vendor consolidation, organisations gain better pricing leverage, improve service consistency and reduce security and compliance risks.
How vendor consolidation cuts costs_
Vendor consolidation significantly reduces costs by streamlining operations and eliminating redundancies.
By working with fewer vendors, businesses can negotiate better pricing terms, as strategic partnerships often come with volume discounts or bundled service offerings. This leads to immediate cost savings on licensing fees, subscription costs and maintenance contracts. Additionally, the reduced administrative burden of managing multiple vendors translates into fewer overhead expenses, freeing up resources for other priorities.
Another way vendor consolidation cuts costs is by curbing inefficiencies. When services are spread across multiple vendors, businesses often face overlapping functionalities and duplicated expenses. Consolidating vendors allows organisations to standardise their technology stack, ensuring that they only pay for the tools and services they genuinely need. This simplifies troubleshooting, training and integration processes, further reducing operational costs.
Finally, consolidation can help prevent the hidden costs associated with vendor sprawl. These creeping expenses, such as unnoticed auto-renewals, unutilised features or inconsistent pricing structures, can quickly drain resources. Consolidation enables businesses to maintain better financial oversight and accountability, ensuring that every pound spent aligns closely with their strategic goals. This fosters a more sustainable and cost-effective approach to vendor management.
What are the signs you need vendor consolidation?
So, how do you know whether your organisation has a vendor problem it needs to solve? Here are some signs to look out for:
- Unmanageable number of vendors: If you find yourself overwhelmed by the sheer number of suppliers and contracts to manage, it’s a clear indicator that vendor consolidation could simplify operations.
- High administrative overhead: Managing multiple vendors often leads to a significant administrative burden, consuming time and resources that could be better utilised elsewhere.
- Overlapping or redundant services: When services from different vendors overlap in functionality or duplicate each other, it results in unnecessary expenses and inefficiencies.
- Lack of pricing leverage: Working with too many vendors often prevents businesses from negotiating competitive pricing terms, as they miss out on volume discounts or bundled packages that strategic partnerships might offer.
- Security and compliance risks: Managing a wide array of vendors increases the risk of inconsistencies in security and compliance protocols, making it harder to maintain a robust and unified standard.
- Hidden costs: Vendor sprawl often brings hidden costs, such as unnoticed auto-renewals, unutilised features or inconsistently priced contracts, which can drain financial resources without adding value.
- Difficulty in troubleshooting and integration: A diverse vendor ecosystem can complicate troubleshooting and the integration of services, leading to delays and operational inefficiencies.
If your organisation faces one or more of these challenges, vendor consolidation can offer a pathway to reduced complexity, lower costs and improved efficiency in managing your IT and technology needs.
Tips for consolidating your vendors_
If you’re experiencing the side effects of vendor sprawl, it’s time to consolidate. Here are some practical tips for doing it.
1. Audit your current vendor landscape_
Start by assessing all active vendors and contracts to understand the scope and scale of your existing engagements. This will require you to work with stakeholders across the business to uncover what vendors they’re using and how.
The output should be a comprehensive list of your business vendors, including their monthly or yearly cost and what they’re being used for.
2. Identify redundancies and underutilised services_
Once you have your vendor list, pinpoint duplicate functionalities across vendors and services that add little to no value. Again, this will require input from cross-organisation stakeholders. You may also need to revisit contracts to understand exactly what you’re getting from a vendor and if they offer anything you aren’t using.
Signs of vendor redundancies include overlapping functionalities between multiple providers, which lead to duplicated efforts and unnecessary expenses. For instance, if two vendors offer similar IT support solutions, this presents an opportunity to streamline and reduce costs.
Another indicator is the presence of services that are rarely or never used, which can result from overestimating requirements or purchasing overly complex solutions.
You’ll also need to search for underutilised tools that go unnoticed or unused by teams. This might be due to a lack of awareness, inadequate training or the service failing to meet the organisation’s needs. Auto-renewals for dormant subscriptions and contracts with vague deliverables can also point to underutilised resources, draining your budget without providing tangible benefits.
3. Evaluate vendors for consolidation opportunities_
Now, it’s time to streamline that vendor list. Firstly, you will want to remove vendors that aren’t being used, including those that may have auto-renewed without you realising. Some vendors may require you to hand in notice, so seek to do this as soon as possible before more money is lost.
Then, where there are vendors offering services you need, look at how you can combine them. If there is a vendor you use very minimally, even if it’s for a service you need, it’s worth approaching more dominant vendors to see if they can cover that need and more.
More generally, you need to evaluate the vendors available to you to understand to what extent they can cover your business-wide needs and at what price. You don’t need to use just one vendor, but you want to minimise the number as much as possible.
Finding multi-talented vendors_
The key to effective vendor consolidation is finding vendors who can serve multiple needs within your IT and technology landscape. It’s not just about fewer vendors, but smarter vendor selection.
Here’s what to look for when seeking multi-talented vendors:
- Comprehensive service offerings: Look for vendors who can provide a wide range of services, including IT support, cyber security, cloud solutions and system integration. This may also extend to advanced capabilities like data analytics, AI and system optimisation. This ensures a holistic approach to managing your technology infrastructure, reducing the need to engage with multiple providers for niche solutions.
- Scalability: Ensure the vendor can scale their services as your business grows or changes, accommodating future needs without requiring additional providers. This will enable you to continually minimise vendors without limiting your future.
- Customisation: Seek vendors capable of tailoring their solutions to fit your specific business requirements rather than offering a one-size-fits-all approach. By getting customisation, you can ensure that your specific needs are met, which can reduce the risk of needing further vendors or people resorting to shadow IT.
- Integrated platforms: Multi-talented vendors should offer integrated tools that allow compatibility between various systems and simplify overall operations. Integration is key for smooth processes, so by ensuring services working within your business, you’ll get much better performance.
- Cost efficiency: Prioritise vendors that provide competitive pricing while ensuring high-quality services to optimise your expenses. This will ensure your consolidation efforts reduce costs rather than increasing your overall bill with one vendor.
- Support and training: Look for vendors that offer excellent customer support and employee training to maximise the utilisation and effectiveness of their solutions. This will ensure you get more value from their services and products, reducing the need for more vendors.
- Future-focused innovation: Try to find vendors who invest in research and development to provide cutting-edge technology aligned with market trends. This will ensure your business grows with them as the outside world changes, so you don’t need to introduce more vendors later.
Vendor consolidation in action: Microsoft_
When thinking of multi-talented vendors, Microsoft is a front-runner due to its technology and expertise across core IT areas. Let’s explore how vendor consolidation works, looking at Microsoft specifically.
1. Comprehensive product ecosystem_
One of the reason Microsoft works so well as a one-stop-shop vendor for consolidation is the breadth of products it offers. You can get a wide range of enterprise-grade solutions under one umbrella:
- Microsoft 365 for productivity and collaboration
- Azure for cloud infrastructure and services
- Defender and Sentinel for security and threat detection
- Power Platform for low-code automation and analytics
- Dynamics 365 for CRM and ERP
- Intune for device and application management
- Microsoft Viva for employee experience and engagement
- Microsoft Purview for data governance and compliance
- Copilot for AI integration across these tools
Better yet, these tools all seamlessly integrate with one another. By using Microsoft tools, you can build a custom technology stack that fits your needs and reduce the risk of complexities, obstacles or data silos.
2. Enterprise-grade security and compliance_
Microsoft invests heavily in security, offering built-in compliance tools and certifications across industries and regions. Centralised security management through Microsoft Security Center and compliance dashboards ensures that businesses can monitor and address potential risks effectively from a single location.
This approach is critical for vendor consolidation, as it simplifies the management of security and compliance. Instead of juggling multiple providers and systems, businesses benefit from an integrated solution that reduces complexity, improves efficiency and lowers operational costs. Microsoft’s unified security ecosystem minimises the risk of gaps or overlaps in coverage, ensuring that every part of the infrastructure is protected without redundant efforts.
3. Scalability and flexibility_
Azure, Microsoft’s cloud, supports everything from small-scale apps to global enterprise workloads, offering unmatched scalability to meet evolving business needs. With its robust infrastructure, businesses can adjust their operations seamlessly, scaling resources up or down based on demand without compromising performance or security.
Microsoft ensures its technology stays future-proofed through its commitment to innovation and regular updates. The twice-yearly wave releases deliver new features and enhancements across Microsoft platforms, ensuring businesses have access to cutting-edge tools and capabilities to stay competitive in dynamic markets.
Licensing models and service tiers further enhance flexibility, allowing businesses to choose solutions tailored to their needs and growth ambitions. This adaptability ensures that Microsoft’s technology ecosystem not only meets current requirements but is well-prepared to support long-term strategic goals. It also means you can select licensing options that fit your needs and budget, helping to control costs.
4. Unified support_
Microsoft’s commitment to seamless service delivery is enhanced by its vast network of certified Microsoft Partners. Microsoft Partners serve as a one-stop solution for accessing a wide range of Microsoft tools, enabling businesses to consolidate vendors and streamline essential processes. This approach reduces complexity and enhances operational efficiency, freeing organisations to focus on strategic priorities.
Additionally, these certified partners bring an extensive depth of IT expertise, providing tailored guidance and support to ensure the smooth implementation and customisation of Microsoft’s technology ecosystem. In some cases, partners may also offer outsourced IT services, backed by Microsoft expertise, to address more of your needs.
Vendor consolidation: our story_
Being over 20 years old, vendor sprawl was an issue we’d seen grow at Infinity Group over time. So, we undertook a project to solve it, by moving to an all-Microsoft tech stack.
Since making the move, we’ve experienced:
- Over 180 staff hours saved weekly
- A 14% increase in project profitability
- Projected savings of £1 million+
In the video case study below, we discuss our experience during the process and what it means for our future.
If you’d like to learn more about how we can apply our learnings to your own vendor consolidation project, or simply have an informal chat about it, get in touch through the form below.
