Navigating the Complexity of the Enterprise Tech Stack

February 26, 2024

There’s no denying that technology has become a linchpin for success in many organizations. But in financial institutions especially, the rapid rise in use of third-party solutions over the past few years has made adopting and managing the right tech stack complex. In this post, we’ll take a closer look at the sources of this complexity, the challenges that arise from them, and a few keys to taming the tech stack. 

Source problem: Silos in vendor management

A majority of tech stack complexity stems from a fragmented ecosystem, with disparate teams navigating the vendor landscape through different lenses and employing various solutions. Financial institutions typically operate through four distinct groups, each playing a crucial role in tech management:

  • Sourcing: This group, responsible for procurement, often utilizes solutions like Ariba, Coupa, Ivalua, or GEP to streamline the sourcing process and manage vendor relationships.
  • Third-Party Risk Management (TPRM): Teams focusing on managing third-party risks often employ solutions such as KY3P from S&P Global to assess and mitigate risks associated with external vendors.
  • IT: The IT department relies on IT asset management solutions like ServiceNow, Flexera, or LeanIX to manage and optimize the organization's technology assets.
  • Finance: Finance teams commonly leverage solutions like Oracle, SAP, and Apptio for financial management and planning.

Unfortunately, these groups often operate in silos, utilizing different, and many times unconnected solutions. This lack of commonality results in significant data discrepancies, hampers operational efficiency, and poses risks to the organization, all which we’ll outline further below. 

A view of the siloed vendor management ecosystem.

Issue 1: Data discrepancies hamper visibility

Data discrepancies between these repositories are not only common but also pose a considerable challenge. A normalization opportunity of around 25% exists by resolving issues such as typos, errors from manual inputs, and companies that have changed or no longer exist. Furthermore, substantial discrepancies (around 30%) can be identified between these different repositories, making it hard to trust the information and achieve enterprise visibility.

Issue 2: Vendor and solution level disconnect creates gaps

Managing vendors and solutions poses a significant challenge. While sourcing and TPRM platforms operate at the vendor level, IT Asset Management tools function more at the solution and version level. There is no single view that accurately provides the full hierarchy and dependencies between vendors and solutions (parent organizations and acquired companies, etc.). These gaps in visibility can pose risks, leaving you open to vulnerability and other unforeseen changes. 

Issue 3: Redundancies lead to inefficiencies

Every new engagement with a vendor leads to a new record being created in the repository. Different countries, departments, project statuses, etc. are recorded as individual records. This leads to a redundancy rate of about 50% in our experience. Redundancy hampers productivity and oversight, and removes any potential leverage for contract negotiation. 

The solution: A single source of truth

Financial institutions grapple with thousands of vendors and tens of thousands of solutions, on average. The absence of a single source of truth - a comprehensive catalog - makes it impossible to understand, categorize, and index the tech stack. This catalog must unify vendors, solutions, and version information, use across all branches of the organization, and cover the entire tech ecosystem: software (on-prem, SaaS, and open-source), hardware, and IT professional services. 

Source problem: Lack of catalog granularity and freshness

As we just determined, a centralized catalog is critical for enterprise visibility. But most catalogs leverage taxonomies that don’t provide the level of detail needed to be truly impactful and this high-level information can also become very stale, very quickly. Let’s uncover the typical issues organizations run into with traditional, manually managed or manually updated catalogs and their taxonomies. 

Issue 1: Tech is unnecessarily added to the stack 

It’s estimated that 30% of new solutions onboarded annually are actually unnecessary because the organization already has a solution installed with the functionality needed. These overlapping solutions represent both a waste of money and time, as onboarding a new vendor typically takes 18 months in financial institutions. This is where ruthless reuse policies must be enforced. To empower reusability, categorization at the feature level with 1,000-2,000 categories is essential. The taxonomy must also be continuously updating as solutions evolve and feature sets expand or, in some cases, contract. An integrated permit to buy process helps ensure the entire organization is doing their part to ruthlessly reuse existing solutions. 

Issue 2: Consolidation opportunities are hard to find

On top of adding new tech solutions you don’t need, there’s an estimated 5-10% of the existing stack that already contains functional duplications. While some overlapping solutions serve risk mitigation or business continuity purposes, many are a waste of valuable budget that could be allocated elsewhere. Lack of visibility leads many to focus their consolidation efforts towards the higher spend, top 50-100 core platforms and strategic vendors (like Microsoft, IBM, etc.) that make up approximately 70% of software spend. But opportunities for consolidation are more ripe in the bottom 30% of spend and visibility, what we refer to as the long tail of solutions (e/g document management, reporting, etc.). These long tail solutions tend to be highly commoditized and easier to decommission due to lower organizational dependency. 

Entrio recommends looking for solution consolidation in the bottom 30% of spend

Issue 3: Resilience and risk is hard to balance 

Optimizing costs is not the sole concern; organizations must also consider resiliency and risk. Identifying risk concentrations and ensuring business continuity with backup solutions is a critical piece of the DORA regulations, for example. Assessing alignment with industry trends and benchmarking against peers are integral in maintaining a healthy tech stack.

The solution: A live solutions catalog with a robust taxonomy

Most current taxonomies, especially for software, lack the necessary granularity to derive actionable insights from the data. Entrio has built the most robust taxonomy (1,600+ nodes and counting) in the market, tailored for banking and insurance organizations. We have specific banking, insurance, shared business functions, technology, and market data taxonomies. This is the key to revealing consolidation opportunities, driving reusability, and identifying risks. Entrio’s always-on, self-updating catalog of solutions leverages this taxonomy and allows you to filter according to solutions, vendors, categories, capabilities and even sentiment. 

Additional reading

For more guidance on taming the tech stack, take a look at some best practices for responsible tech adoption we’ve compiled through our work with tier-1 banks. 

Moises Cohen
Co-founder & Chief Product Officer