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VENDORCONSOLIDATIONTHE
JOURNEY
TOWARDSEFFICIENCY
AND
GROWTHInaneradefinedbyrelentlesschangeandongoingcrises,manyorganizationsarefindingthatmanagingcomplexvendorlandscapesisconsumingsignificantamountsoftimeandeffort.Thisvendorsprawlisnotonlyincreasingthedifficultyofcoordination,butit’salsodrainingsubstantialresources,leadingtocostinefficiencies.TheITpartnerecosystem,originallya
sourceofinnovationandaddedvalue,hastransformedintoanoverheadburdenthatrequiresa
costlymanagementlayertofunctioneffectively.Butatthesametime,weareobserving
a
surgeintechnology-relatedspendingwithmorethan60%ofbusinessesplanningtorampuptheirinvestmentsindigitaltransformationin2023.[1]
Thecriticalquestionthatarisesis:canthesecompaniesdelivervaluefromtheseinvestmentswhilstalsomanagingmultiplevendorswithcompetingagendas?TheanswerliesincostoptimizationwithinITandotherbusinessareas.Vendor
consolidation
canbea
cruciallevertoachievethisbalance.Whenexecutedeffectivelywiththeassistanceofanexperiencedservices
provider,itcanleadtosignificantcostreductions,enhanceoperationalefficiency,andrevealuntappedopportunitiesthatwerepreviouslyinaccessible.[1]
Boston
Consulting
Group
(November
2022),Mind
the
TechGap.2VendorconsolidationUNLOCKING
EFFICIENCIESTHROUGH
CONSOLIDATIONRecentreportssuggestthat75%oforganizationsarepursuingvendorconsolidationin2022,upfrom29%in
2020,emphasizingthegrowingsignificanceofthisstrategy.[2]
By2025,itispredictedthat70%oforganizationswillconsolidatethenumberofvendorssecuringthelifecycle
ofcloud-nativeapplicationstoa
maximumofthreevendors.[3]Moreover,engaginga
smallernumberofmoreversatilevendorsmakeseverything
runsmoothlyandincreasescompatibilityacrosstheentireITenvironment.
Thismakesitpossibletoscaleoperations—eitherupordown—withminimalissues,adaptingtothebusiness’schangingneeds.Andthat’snotall.Havingfewervendorsleadstoa
streamlinedprocurementandinvoicingprocess,therebyreducingtheadministrativeworkload.Thisalsoenablesmoreefficienttrackingandmonitoringofvendorperformance,adherencetocompliancestandards,andcontractmanagement.Theoverarchingideahereissimple:byreducingthenumberofserviceproviders,companiescancapitalizeonvolumediscountsandslashadministrativecostslinkedwithhandlingmultiplevendorrelationships.Moreover,a
singlepointofcontactforITservices
removescommunicationcomplexities,enhancingservice
levels,andfreeingcriticalresourcesforotherITinitiatives.Consolidationisa
smartmovethatboostsoperationalefficiency.Ithasthepotentialtopushthebusinessmodeltothenextlevel,makingita
stepworthconsideringinthejourneytowardsbetterbusinessperformance.Forexample,whenitcomestocybersecurity,itwasobserved
thatthenumberofincidentssignificantlydropswhenfewervendorsareinvolved.Thereason?ConsolidationensuresthatsecurityprotocolsmaintainaconsistentstandardacrosstheITinfrastructure,therebypromotingamorecohesive,integratedapproachtosecuritymanagement.[2]Gartner
Inc.,
Gartner
Survey
Shows
75%ofOrganizations
Are
Pursuing
Security
VendorConsolidation
in
2022(September
13th,
2022)[3]Cisco
(March
2023),Stop
the
Sprawl:
HowVendor
Consolidation
Can
Reduce
SecurityRisks
in
the
Cloud.3VendorconsolidationOVERCOMING
THE
CHALLENGESWhiletheperksofconsolidation,likecostsavingsandincreasedefficiency,areappealing,businessesmuststayawareofpossibleissuesthatmightariseduringtheprocess.ThetaskofbringingtogethermultipleITservicesvendorscanpresenta
numberofchallenges.Ifthesearenotdealtwithrightaway,thebenefitsoftheentireconsolidationeffortcouldbewatereddown,andthebusinessmightfaceevenmoreriskthanbefore.Thisisparticularlytruewhenthereisnotenoughexpertisetomanagetheprocessproperly.So,whatarethemajorhurdlesthroughouttheprocess?people.Maybetheywouldnow•
Vendormanagement
alsoposesa
potentialbottleneck,addinganotherlayerofcomplexity.Ina
scenarioinvolvingmultiplehavetoraisea
ticketasopposedtopickingupthephonetoa
familiarvoice.Employees,whoareoftenusedtotheirroutines,mayfindithardtoadapttochangesintheirwell-establishedprocessesandmightbehesitanttoengagewithanewvendor.providers,businessesoftenassignspecificteamstomanageeachvendor’s
services.
Whenvendorsareconsolidated,therecouldbeadownsizingofthesemanagementresources.Thiscanleadtodifficultieswhenoverseeingtheservices
ofthenewlycombinedvendor.•
Contractuallimitations
poseanotherroadblockthatanorganizationmayencounteronitspathtoconsolidation.ExistingagreementswiththecurrentITservice
vendorsmayimposerestrictionsontheabilitytostreamlineservices
ortransitiontoa
newprovider.Theseconstraintscouldincludeearlyterminationpenaltiesorclausesthatprohibitmergingservices
withanothervendor.
Servicelevelagreements(SLAs)
areanotherchallengeaseachvendormayhavetheirownonesinplace.•
Withoutdoubt,
employeeresistancestandsasthemostsignificanthurdleinthisscenario.Picturea
companywheretheemployeeshavebecomeaccustomedtoresolvingissuesthrougha
particularvendorchannel.As
youaimtoreducecosts,thisshiftmightnotresonatewiththem-
tothem,it’sa
newprocesswithnew4Vendorconsolidation•
Maintainingservice
qualityisanotherkeyconsideration.Whilevendorconsolidationcanleadtofinancialsavings,businessesmustavoidcompromisingservice
qualityinthepursuitoflowercosts.Tonavigatethischallenge,it’scrucialforthemtocloselyexaminethecostslinkedwitheachITservice.
Inpartnershipwiththeconsolidatedvendororvendors,theyshouldthenbuilda
cost-effectivesolutionthatclearlymeetstheirneedsbasedonagreedmeasures.•
Unpickingcomplexity
isyetanotherchallengethata
companyattemptingtoreduceitsnumberofvendorsmightneedtodealwith.Thiscomplexityrangesfrommanagingemployeeresistancetocertainchanges,toweighingtheprosandconsofbreakinga
contracttoattainspecificbenefits.Thiscanbeespeciallydifficult,
asmanycompaniesarenotevenawareofthecomplexitiesinplay.•
Lastly,theimportanceofcommunicationandcollaborationcannotbeoverstated.Consolidatingvendorsoftenresultsinshiftsinprocessesandprocedures,whichcancreatea
climateofconfusionanduncertaintyamongemployees.To
addressthisissue,it’scrucialforbusinessestomaintainclearandtransparentcommunicationwiththeiremployeesandstakeholdersregardingtheconsolidationprocess.Additionally,providingcomprehensivetrainingcanhelpwithensuringthateveryone
iswell-versedin
the
new
processes
and
procedures.5VendorconsolidationTURNING
LESS
INTO
MORETheroadmapfora
successfulvendorconsolidationshouldconsistofthesethreekeyphases:2.
DESIGNThefollowingphaseentailstheWhileitmaysoundlikethisistheend,vendorconsolidationshouldcontinueevenafterthetransitionhasbeencompleted.Itisbeneficialtokeepstreamliningandautomatingprocessesandlookingforpotentialconsolidationopportunitiesthatcanbringthecompanyevenclosertoitsidealendstate.creationofa
solutionarchitectureandthedraftingofa
well-definedStatementofWork.It’salso1.
PLANNINGWhenembarkingona
vendorconsolidationjourney,theinitialstepshouldalwaysinvolvetakinga
stepbacktoreviewthecurrentsituation.Thisinvolvesconductinganassessmentduringwhichdatasourcesareidentifiedandanapproachisagreedupon.Itisatthisstagethattheframeworkiscustomized,dataisgathered,quantitativesegmentationimportanttoestablishanSLAandKPIframework,aswellasadetailedtransitionplan.Completingcommercialandlegaldocumentsisalsoessentialduringthisstage,astheywillbecruciallateron.To
ensuresmoothsailingthroughallthesestages,particularlywhentheorganizationlacksexperienceinvendorconsolidation,it’scrucialtohavea
competentpartnerguidingthecompanythroughtheentireprocessandallofitsphases.3.
EXECUTIONWhenitistimeforthetransition,itisgoodtoinstitutionalizebestpracticesandimplementtoolsthatwillassistinmanagingthetransition.A
well-craftedmigrationplanisusefulhereandshouldincludenewmetrics,cut-overdates,exitcriteria,andotherimportantelementsofthetimeline.Themigrationtofewervendorsshouldbeconductedinstagestoavoidoverwhelming
operations.andsuitabilityassessmentsareperformed,andclusteringandconsolidationrecommendationsaredetermined.Thisphaseentailsthecreationofa
solutionarchitectureandthedraftingofa
well-definedstatementofwork.6VendorconsolidationFROM
EXPERIENCE
TO
EFFICIENCYLeveragingyearsofexperience,Capgemini’sADMnextVendorIna
seven-monthprojectConsolidationapproachstreamlinesITservices
setupforclients.Thisapproachsimplifiesvendorcontractmanagement,
overseestheCapgeminihasconsolidateda
globalchemicalgiant’sITlandscapeof50applicationsacross17providers.Utilizingprovenmethods,weclosedSLAgapsandextendedoursupportbeyondtheoriginalscope.Thisapproachresultedinover2,400enhancements,about30,000resolvedtickets,andsignificantcostsavingswithin18months,allwhileachievingconsistentlyhighuserratingsandzeroSLA
breaches.Thisprocessalsoallowedustoautomatetickethandling,leadingtoadditionalsavings.procurementprocesses,andminimizestechnology-relatedcosts.Weuseadvancedtoolsintheinitialassessmentphasetocrafta
tailoredconsolidationplan,analyzingcontractors,services,applications,andinfrastructures.Withvastbusinesstransitionexperienceanda
comprehensivesuiteoftools,wecansmoothlytransitionclientstoanidealvendorlandscape,achievingcostreductions
between
20-50%,
dependingontheclient’smaturity.Read
more7VendorconsolidationTHE
RIGHT
PARTNERAttainingsuchbenefitscantakea
lotofpreparation,butasanexperiencedpartnerwhohastherighttoolsetanda
uniqueexpertiseinvendorconsolidation,wecanhelpyouminimizecosts,driveefficiency,andachievethefutureyouwant.
Contactustodaytoseehowwecanhelpyoureapthebenefitsofconsolidatingyourvendors.8VendorconsolidationAboutCapgeminiCapgemini
is
a
global
leader
in
partnering
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