The High Cost of IT Vendor Sprawl

If your company’s IT ecosystem has evolved piecemeal over the years, you’re not alone. Many companies integrate new vendors to satisfy the needs of the moment or take advantage of a good deal. Eventually, however, you end up with a complex patchwork of multiple vendors providing overlapping services.

This diverse IT vendor landscape is not ideal, and the cost of an overly fragmented vendor landscape adds up. 

Let’s take a look at five reasons why IT vendor sprawl is so expensive, and why 2024 is poised to be the year of vendor consolidation:

1. Integration and interoperability challenges

Integrating solutions from multiple IT vendors can be enormously complex, leading to interoperability issues that impact your day-to-day operations. Issues are related to compatibility, data migration, compliance, and change management and can be so complicated that you have to pay for custom integration to work it all out.

Once integrated, your IT team has to keep the systems communicating with one another. Data silos and technical debt also complicate interoperability and make maintaining a comprehensive view of what’s happening in your infrastructure time-consuming and expensive.

2. Vendor management and coordination

Managing and coordinating vendors can take a massive toll on your IT team’s productivity. The more vendors you have, the more it costs to stay on top of your IT.

Studies show that in-house IT is spending increasingly more time on vendor management. Your team needs to proactively manage each vendor’s maintenance protocols, licenses, and renewal dates while navigating multiple points of contact and user service requests. Testing each vendor patch and update for system-wide compatibility is another time-consuming but necessary task, as is resolving any conflicts between vendors.

It’s easy to understand why IT staff say they feel more like project managers.

3. Overly complex risk management

Each additional vendor represents additional points of entry for cyber threats. More accounts, more credentials, and more access points translate into a larger and more vulnerable attack surface for your company.

It only takes one overlooked vulnerability with one vendor to compromise your entire network.

In addition to more vulnerabilities, fragmented security policies across vendors is another issue that requires management — the fragmentation leads to gaps in protection and processes. To complicate things further, vendor security recommendations may conflict with one another and cancel each other out or create unintended weaknesses. It’s up to your IT team to develop and enforce uniform policies across your IT ecosystem.

4. Growth and agility roadblocks

The cost of lost productivity and business opportunities created by vendor sprawl may be hard to quantify, but it’s real. Every hour your team spends managing vendors is an hour not spent innovating or generating revenue.

Even if your team has enough bandwidth to innovate, can they implement their ideas? IT ecosystems made up of multiple vendors make it difficult to be nimble.

Too many vendors can also affect employee morale. Navigating a myriad of tools, systems, and interfaces slows them down and creates friction.

5. False security and loss of bargaining power

While having more vendors may give the impression of providing a more reliable footing — if one vendor goes offline, it has less impact on you because your other vendors are still operational — that’s not the case in today’s world.  Your vendors can be connected in ways you’re unaware of, such as running on Amazon Web Services (AWS) or using the same enterprise SaaS. If a service they use goes down, it takes your vendors with it.

You also give up some leverage when you spread your money around. You miss out on volume discounts and can struggle to establish strategic long-term partnerships because your business isn’t as valuable as other clients. You need partnerships you can rely on for a lean operation.

Why 95% of companies are consolidating vendors

When recently ran a poll to gauge where the CIO Tech Talk community stands on vendor consolidation, almost every respondent answered “yes” when asked if they planned to consolidate vendors in the next 12 months.

That’s more than a trend. That’s a business shift.

Reducing costs was the second most popular reason, with 69% of respondents citing it as a driver for consolidation. The number one reason? Reducing the number of point solutions, which came in at 80%. Having multiple vendors is just too much to manage.

A total of 83% said they felt moderate to high pressure to consolidate, yet respondents were split on whether they preferred to consolidate with startups or more established companies. Both have caveats. Choosing to consolidate with a startup can be risky and consolidating with a vendor that’s too big can leave you without the attention you deserve.

What to expect when you consolidate vendors

Your experience will depend on your current level of vendor sprawl and the number of vendors you plan to consolidate. For a snapshot of what it takes to consolidate vendors, see our Checklist: How To Develop an IT Vendor Consolidation Roadmap.

After you consolidate, you can expect:

  • Economies of scale — Consolidation reduces vendor management, contracting, licensing, maintenance, and support expenses.
  • Increased efficiency — A more seamless environment enables more automation and unified processes.
  • Enhanced agility — Increased employee focus on strategic initiatives drives innovative solutions and new-technology adoption.
  • Improved security — Eliminating security gaps at the seams and centralized security management reduce your attack surface and related risks.
  • Improved service delivery — Reducing vendors results in more reliable operations.
  • Strategic alignment — A stronger, more productive relationship with your IT partner enables you to better capitalize on their insights.

From inefficient to streamlined

Consolidating vendors is an essential step to optimizing your IT ecosystem and reducing the high costs associated with IT vendor sprawl.

The shift not only reduces your direct costs but enhances your operational efficiency, improves security, and creates room for innovation. No wonder IT leaders and CIOs are taking a long hard look at their budgets and the number of vendors they need to orchestrate.

As your IT and cybersecurity partner, Leapfrog works with you and your legacy vendors to manage vendor consolidation — we’ve been facilitating vendor consolidation for more than two decades. Our migration experts use our proven change-management processes to ensure you get a smooth, secure transition and the simplified IT operations you need to improve your business results.

For more information, read our chief technology officer’s take on How To Reduce Spending and Gain Efficiencies By Consolidating IT Operations Vendors or please get in touch with us today.