How to Approach and Execute Vendor Consolidations

April 16, 2024

Key Considerations & Our New Module

With technology being a fundamental asset for organizations today, deciding to disengage from a vendor or solution requires careful consideration. You must navigate the delicate balance between managing technological infrastructure, adhering to budget constraints, and maintaining a competitive edge. We at Entrio get how complex this is. 

This post outlines the key considerations and potential consequences to take into account throughout the vendor decommissioning process. It also highlights a new module in our platform, designed to be the central location for you and your team to collaboratively manage all of your strategic tech decisions, including consolidation opportunities, new purchase requests, renewals, and compliance actions. For now, let’s dive into how it makes your solution consolidation opportunities visible and streamlines the evaluation process, so you can take action. 

Finding Vendor Consolidation Opportunities

There are many reasons to decommission a vendor or solution: cost or risk is too high, satisfaction from employees or customers is low, or if you’re like many financial institutions we talk to, you need to pare down the tech stack.

A CIO Tech Talk poll discovered that a strong majority of respondents feel pressure to consolidate vendors in 2024. 60% of respondents feel medium pressure, while 23% feel high pressure. With the driving force behind this pressure being “Systems architecture - we have too many point solutions and want to do more with fewer strategic vendors.” 

But finding consolidation opportunities can be a real challenge. We estimate that at least 5-10% of your enterprise tech stack contains solutions with functional duplications. While some overlapping solutions can offer resiliency, many are a waste of valuable resources. We’ve seen many organizations focus their consolidation efforts on the top 50-100 vendors, because those are well understood and make up the most spend. But solutions in the long tail of spend and visibility tend to be highly commoditized and easier to decommission due to lower organizational dependency. 

This is where Entrio’s new execution & prioritization module for solution consolidation comes in. It automatically highlights the consolidation opportunities in your organization categorized by domain. This list helps you prioritize and organize the information needed to simulate different scenarios and ultimately, carry out an effective vendor consolidation strategy. Let’s dive into the details. 

The Entrio execution and prioritization module for solution consolidation automatically highlights the domains in your organization, such as Application Performance Management, with multiple, overlapping solutions. Please note all information included here is from a fake environment created for illustration purposes only. 

Understanding the Vendor Relationship

Before deciding to decommission a vendor, you need to determine if there’s even a possibility of moving away from them in the near future. Start by answering the following questions:

  • How much money are you spending with them?
  • When does the contract expire?
  • Who in your company is responsible for working with them?
  • How important are they to your daily business?
  • Do you have other solutions that offer the same function(s)?

This reveals the extent to which the vendor is embedded in the company's processes, the potential risks of disengagement, and if a replacement would be needed or not. 

In this process, one of the most significant challenges is that information is typically scattered across multiple platforms. Collecting it can be time consuming and not having it can lead to poor decision-making. Our module combines all the crucial details in one place. Seeing the criticality, cost impact, alternatives, and potential timing of the change in a dashboard makes it easier to decide if further evaluation is prudent. 

Evaluating the Impact on the Business

Once the scope of the relationship is understood, it’s critical to dive deeper and make a more strategic assessment. Consider the following: 

  • Do they give you a competitive edge?
  • Are there alternative solutions that are comparable or better?
  • Does the vendor provide specialized expertise or proprietary solutions that are not easily replaced?
  • How are they integrated within your company's systems?
  • What level of operational risk does the change pose to the organization? 

A thorough understanding of the active integrations and associated risks sheds light on the time and financial investment needed for a smooth decommissioning process. It’s also vital to take into consideration both the short term and long term impacts on the business.

Entrio's comprehensive Live Solutions Catalog gives you a detailed look at each solution, highlights any alternative solutions already engaged with your organization or in the broader tech market, and offers an easy way to compare them. This one, two punch makes the team more informed and increases the speed of the decision-making process.

Breaking Down the Costs of Decommissioning

Navigating the complexities of vendor decommissioning requires careful consideration of both direct and indirect costs. Direct costs are clear: contract termination fees, data migration expenses, and potentially buying new solutions to replace the outgoing one. But indirect costs, like a decline in employee productivity, retraining employees, or customer dissatisfaction stemming from any interruptions in service, can catch you off guard and also have a significant impact. 

Our new module integrates decommissioning costs into the broader financial landscape and factors in contract expiration dates as well. This transparency ensures decision-makers can confidently forecast and plan for the financial ramifications of decommissioning.

Considering Timeline and Budget

Creating a clear and definitive timeline for vendor decommissioning is critical to minimizing business disruptions. Companies must carefully estimate the duration of the decommissioning process, which may include selecting a new vendor, negotiating contracts, and implementing the new solution. It’s also vital to pinpoint when financial impacts will occur. Organizations need to forecast both the immediate and long-term financial implications to avoid unforeseen budget overruns or cash flow issues during the transition period.

Our cutting-edge module is designed to give you control over crucial variables such as costs, timelines, and specific business needs. It enables you to simulate various scenarios, projecting potential outcomes into the future or assessing the impact of past decisions. With this capability, you can visualize the end-to-end effects of your decommissioning decisions, ensuring a well-informed and strategic approach to vendor transitions.

Wrapping Up

The decision to decommission a technology vendor or solution is a complex and nuanced one that requires careful thought and a strategic approach. You must examine the vendor’s relationship to your organization, the potential operational impacts, the associated costs, and the projected timeline for the transition. 

Our platform provides a centralized hub, streamlining the collection and organization of data critical to highlight solution consolidation opportunities and guide the decommissioning process. The module ensures that a transition to a new technology partnership is aligned with the organization's current requirements and future aspirations, thereby reinforcing its long-term strategic goals. With this resource, companies can confidently navigate the decommissioning landscape, securing a technological alliance that supports their evolving objectives.

The Entrio execution and prioritization module for solution consolidation streamlines all the information needed to decommission a vendor or solution. Please note all information included here is from a fake environment created for illustration purposes only. 

Our innovative execution and prioritization module for solution consolidation streamlines the vendor decommissioning process. It provides a comprehensive overview of your technology landscape and highlights solution consolidation opportunities. It allows you to effortlessly track vendors and solutions engaged within your organization, monitor tech spend, assess status, and stay informed about upcoming contract expiration dates. Additionally, it identifies which business areas are utilizing these solutions. Recognizing the importance of centralized information, this module is designed to enhance the management of your existing vendor relationships, optimize your current infrastructure, and increase solution reusability for maximum efficiency.

Solution consolidation is the first of many strategic decisions the execution and prioritization module will help you make in the future! Keep an eye out for upcoming posts where we’ll highlight this module for compliance and resiliency actions, purchase requests, and renewal requests.

Judith Levy Silberberg
Director of Product Management