What is vendor consolidation and how do you approach it?
Most organisations pay for more than 150 software subscriptions. Vendor consolidation — deliberately reducing the number of suppliers — is the most effective way to save costs and regain clarity.
- 1 November 2024
- 5 min
Vendor consolidation is the strategy where organisations deliberately reduce the number of software suppliers. Instead of using a separate tool for each function, a limited number of preferred suppliers are chosen who cover multiple needs.
Why vendor consolidation?
The average medium-sized organisation pays for more than 150 different SaaS tools. Each with its own contract, billing cycle, administrator, and renewal date. Costs are fragmented, oversight is lacking, and negotiating positions are weak.
Vendor consolidation solves four problems simultaneously:
- Costs: Fewer suppliers means larger volumes per supplier, providing more negotiating leverage for lower prices and better terms
- Management: Fewer contracts, fewer invoices, fewer renewal dates to track
- Security: Fewer integrations between tools means a smaller attack surface
- Compliance: A more limited supplier list is easier to audit and document for NIS2 and GDPR
How do you do vendor consolidation?
Step 1: Categorise your software landscape. Group all tools by function: communication, project management, security, storage, HR, etc. Which categories have the most overlap?
Step 2: Analyse usage and satisfaction. Which tools are actually being used? Which are popular with end users? Consolidating to a tool nobody likes is counterproductive — it leads to shadow IT.
Step 3: Select preferred suppliers. Choose one or two preferred suppliers per category. Actively negotiate bundle prices when purchasing multiple products from the same supplier.
Step 4: Phase the rollout. Don’t consolidate everything at once. Start with categories that have the most overlap and the least resistance. Build momentum for the more challenging transitions.
Vendor consolidation and lock-in
The biggest risk of consolidation is vendor lock-in: excessive dependence on one supplier makes you vulnerable to price increases, company takeovers, or service degradation. Always have an exit strategy: contractually agree on how data export works, what the transition period looks like, and the costs involved in early termination.
Frequently Asked Questions
The most commonly asked questions on this topic.
What is vendor consolidation?
Vendor consolidation is the deliberate reduction of the number of software suppliers. Instead of using ten tools for similar functions, you work with one or two preferred suppliers. This brings economies of scale, less management overhead, and improved negotiating positions.
How many suppliers are optimal?
This varies per organisation. Generally: the fewer suppliers for the same function, the better. Start with the categories that have the most overlap — communication, project management, and security are classic candidates.
What are the risks of vendor consolidation?
The biggest risk is vendor lock-in: excessive dependence on one supplier. Always have an exit strategy and contractually agree on how data export and transition support are arranged.
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