What is vendor consolidation and how do you approach it?

Vendor consolidation is the strategy whereby organisations deliberately reduce the number of Software manufacturers. Instead of using a separate tool for every function, you choose a limited number of fixed parties that cover multiple needs.

Why vendor consolidation?

Many organisations use hundreds of Software tools, each with its own contract, invoice, administrator and renewal date. The costs are scattered, oversight is lacking and the negotiating position is weak. Vendor consolidation addresses four problems at once:

• Costs: larger volumes per Software manufacturer provide more room for better prices and terms.

• Management: fewer contracts, invoices and renewal dates.

• Security: fewer integrations between tools mean less risk.

• Compliance: a shorter list is easier to manage for the Cybersecurity Act, DORA and the GDPR.

How to approach vendor consolidation?

Step 1: Map your Software landscape. Group all tools per function: communication, project management, security, storage, HR. Where is the most overlap?

Step 2: Analyse usage and satisfaction. Which tools are really used and appreciated? Consolidating to a tool nobody likes leads to new shadow IT.

Step 3: Choose one or two fixed parties per category. Negotiate bundle prices if you acquire multiple products from the same Software manufacturer.

Step 4: Phase the implementation. Start with the categories with the most overlap and the least resistance.

Beware of dependency

The greatest risk of consolidation is over-dependency on one party. Therefore document how data export works, what a transition period looks like and the cost of early termination.

How SoftVaro helps

SoftVaro maps your landscape, shows where overlap and risks lie, and negotiates better terms with the Software manufacturers you retain. Read more about our approach at Vendor Consolidation.