We all know the challenges of dealing with external vendors.
The fuss of ordering supplies, the hassle of returns and warranties, the frustration of mediating between suppliers for service resolution. These problems are all too common for many businesses, and the solution is much simpler than you might think.
Currently, most companies use a multitude of vendors to fulfil their outsourcing needs. This has evolved over time, since you chose the vendor that gives you the best price for any given product or service at the time you acquired it. This on top of the fact that if one vendor proves to be unreliable, the rest can pick up the slack, or ensure competition
But these short-term gains are often overshadowed by the complexities of handling so many vendors for each project. These problems can have a huge impact on a business’s bottom line, particularly as the company grows and vendors become even harder to keep track of.
So why should you consolidate?
While outsourcing allows you to pick the best price for any product or service, the true costs to your business are much more difficult to comprehend.
Hard costs refer to the actual price of an item, but research suggests that the soft costs (costs of procurement processes) account for as much as 60% of the total supply cost.
When working with several vendors the number of accounts to be approved and time taken to research vendors and products increases, leading to a huge amount of money being wasted before a project has even started.
When a business reduces its supplier base, their purchasing power increases significantly. By allocating more resources to a single vendor, they can leverage their partnership and receive more product for less money.
When a business works with many suppliers, they can lose sight of where their money is going. Piecing together usage reports from multiple vendors can be extremely time consuming, slowing reporting efforts down to a halt. Meanwhile, having a single partnered vendor means only having one invoice to track down.
Having a dedicated commercial and technical account manager(s) is essential for any long-standing customer-vendor relationship. Having one vendor means engaging with more of their services, in turn cultivating your position as a key customer and getting personalised account management. Having someone who is invested and focused on your business means your problems can be resolved more efficiently, and less time is spent on hold to alternative customer support contacts.
So, is vendor consolidation right for your business? It isn’t as simple as reducing the number of vendors from which you purchase products and services from—it’s a strategic partnership.
Multiple contact numbers, multiple escalation points, different Standard Operating Procedures, different ticketing systems all create opportunity for confusion and issues to fall between the gaps. One of the growing themes in IT is the desire for a Single Point of Contact for all service providers and vendors.
Having a supplier act as a SPOC doesn’t mean that they are capable of doing everything themselves, but they do have the capability and gravitas to coordinate all of the stakeholders required to deliver the desired outcome. This hugely simplifies the relationship between the business and IT and polarises the process of getting outcomes and in a timely manner.
Although it might be unrealistic to consolidate down to a single vendor, establishing stronger relationships with a short list of key partners is a great way to start making critical changes and improve your organisation's efficiency.
We’ve put together this handy IT Outsourcing Guide 2022-2023 to help you understand the best options available to your business for the coming year and beyond.