Fact #1: the average enterprise uses 91 cloud marketing services, plus hundreds more for functions like HR, collaboration, accounting, etc.
Fact #2: there are over 7,000 cloud marketing services to choose from, plus thousands more spanning the breadth of remaining business needs.
Fact #3: this growing vendor clutter threatens the health of almost every enterprise organization in the world.
The numbers speak for themselves, but here’s an image of what this architecture could look like for you (just in case you were wondering).
What is Vendor Consolidation?
Vendor consolidation is the act of reducing the number of software vendors that you work with as a means to cut costs and drive efficiencies.
It’s a lot like supplier consolidation in the supply chain management world, where producers may reduce input channels as a means to lower costs of freight, increase purchase power, and build stronger contracts.
Although consolidation of software vendors doesn’t exactly help with the cost of freight, it does mean streamlining operations and lowering costs across the organization. Simplifying your tech stack is huge—here are some key results that you can expect:
- Increased productivity. The more logins you have, the more you have to remember. The more software you’re using, the more learning curves your team must overcome. The more tools you use with your clients, the more education you have to provide.
- Increased efficacy. Too many solutions from too many solution providers can result in a complex spider web of apps that don’t communicate with each other.
- Reduced expenditure. Software is expensive. Monthly subscription models minimize the appearance of costs, but I assure you that those subscription fees stack up faster than your credit card bills.
The 5 Steps to Optimizing Your Vendor Stack
You literally cannot afford to have vendor costs run rampant at your company. Here are the 5 steps you need to take in order to optimize your stack and ensure that quality persists.
1. Perform a vendor audit
How many vendors do you work with?
Can you name them all?
I’ll wager my first-born that you can’t answer both of those questions (if you can, WELL DONE, and shoot me an email at firstname.lastname@example.org to figure out the logistics).
Am I being overly confident? Perhaps... Or do the numbers speak for themselves...? Definitely. Here’s the average number of vendors across various business cohorts for global enterprises.
And the worst part about this massive list of vendors is the column on the right. This column essentially states that the majority of these vendors that you are currently using were not built for an enterprise level application. Most of them were built for small businesses and enterprise companies are probably over-extending the intended functionality.
Let’s fix that.
Here are a few steps for performing a successful vendor audit:
- Start by contacting accounting as they will likely have the most accurate account of existing paid vendors.
- Record payment volume/schedule alongside each vendor. Also take note of subscription tiers where possible.
- Provide this list to your leadership team and have them proof the list to ensure that no vendors are unaccounted for.
2. Categorize your vendors
Much like the list above, you will want to start filtering and organizing your vendors based on their functionality.
The categories listed in the chart above would make a great starting point for this process. Here are some examples of vendors that might fall in each of these categories:
|Marketing||Ahrefs, Marketo, Unbounce, WordPress, GoDaddy, Constant Contact|
|HR||BambooHR, ADP Workforce Now, Workday HCM, UltiPro|
|Collaboration||Slack, Microsoft Teams, Trello, Asana, monday.com|
|Finance/Accounting||QuickBooks, FreshBooks, FinancialForce|
|CRM/Sales||Hubspot, Salesforce, Yesware|
|Software Development||Cloud9, Linx, GitHub, Codenvy, Axure|
|Productivity||G Suite, Office 365|
|Social||Hootsuite, Buffer, Sprout Social|
|Cloud Storage||Google Drive, OneDrive, IBM, Dropbox, Apple iCloud|
|IT Service/Application Management||Jira, ServiceNow, Autotask PSA, TOPdesk|
Note that these categories are not concrete, and a different organization might work better for your company. For example, if you are in the broadcast industry, you will likely have additional categories for the likes of audio/video editing software vendors.
Once you’ve successfully organized your vendors based on their usages, then you can begin to strategize towards reducing redundant applications.
3. Survey your internal teams to determine usages
Now you’ve gotta figure out who in your organization is using which software, how frequently they use it, and how important it is to their work/productivity. The best way to do this is through a company wide survey. This very well might be the most difficult step, but odds are good that you're already paying for a survey software like SurveyMonkey, which can be a major asset.
A sample survey structure might look something like this:
Do you use this application?
If yes, what is your usage frequency? (If answered no, the respondent would move on to the next vendor)
- Yearly or infrequently
What would be the impact on your work if this vendor were lost?
- Mission critical
- Highly disruptive
- Somewhat disruptive
- Low impact
- No impact
Are there any possible substitutes? If so, please list them: _________________
The best way to distribute this survey might be a company wide memo, indirectly through team leaders, or whatever else you may deem to be the most appropriate for your organization.
Besides, people LOVE surveys, right?
4. Determine preferred vendors
Let’s face it, you probably have multiple vendors that are meeting the same need and being used by different teams. Marketing might be using Trello for project management and customer service might be using Asana. Ergo, you can probably combine these users into one subscription and either save money on a pricing tier or else unlock volume discounts through a single provider.
These are the types of insights that a survey will yield, and these insights will allow you to make the most informed decisions on which vendors to keep/cancel.
But it’s not just that, there are a few additional items that you’re going to want to keep in mind when determining your preferred vendors:
- Breadth of functionality. When making a choice between applications like Trello and Asana, you need to consider which one has the potential to bring your organization more direct value. Consider that though Trello is a simpler UX, Asana is a much better fit for bigger projects and larger organizations as it has various output styles and leverages automation to reduce workload.
- Integrations. As you begin to reduce your tech stack, it would be wise to keep a keen eye on the integrations available within each platform. For example, Trello and Asana both have a massive library of integrations, but with Asana’s enterprise focus, they have more integration capabilities with big platforms like Salesforce, which might be a better fit for your organization.
- Partnerships. There are some vendor partnerships that are sure to be more valuable than others. For example, a Google partnership means that you get access to G Suite, Gmail, Google Drive, and more. And all of these apps work together under the Google cloud platform. Marketplace partnerships can be another big win for your company. Consider that a partner like Vendasta that can bring you apps from various producers, all under one roof, so that you can simplify your billing and customer service. And the best part? Sometimes these partners have already built custom integrations, so you don’t have to.
4.5 Build a custom scorecard (optional)
As you can see, there may prove to be a lot of moving parts in the process of selecting preferred vendors. That's why you may want to consider building a bit of a basic weighted scorecard to help you evaluate vendors at a high level and better gauge competing offerings.
Here are some basic steps for building your scorecard:
- Collaborate with key stakeholders (finance, infrastructure/IT, leadership, etc) to determine key metrics. The attributes mentioned in section 4 should be included, and additional examples might include: price and customer service/support.
- Determine if certain aspects are more important than others and weight them accordingly (a simple excel formula will suffice).
- Expand your survey and have each survey respondent score each of the vendors that they use based on the desired metrics.
- Sum up respondent scores and multiply them against your weightings to determine winners among competing vendor offerings
Here's a sample decision matrix:
By completing this process in addition to a simple survey, you will gain greater prescription and be able to judge vendors not only based on usage volume, but also based on the desired value metrics.
Note: if you would rather not create a scorecard manually, there are technology offerings like RFP360 that can better enable you. However, adding another vendor to your list might kinda defeat the purpose of this in the first place.
5. Eliminate excess vendors
As you reach the final stages of your audit process, you have likely come to at least a few of the following conclusions:
- There are a number of applications that you are paying for that aren’t being used by ANYONE. That’s right, you might be expending thousands of dollars a year (or more) to support pizza and beer funds at dozens of tech companies.
- There are a number of applications meeting the exact same need that are compounding the cost of the service being rendered.
- There are certain vendors that are being under-utilized and could be better deployed to meet additional needs.
- There is substantial room to cancel subscriptions and simplify your vendor architecture.
At last, you get to realize the fruits of your labour. Picking up the phone (or the mouse) and cancelling those redundant and unnecessary subscriptions is by far the most gratifying step of the whole process (plus it will earn you some serious brownie points with the finance department).
Now, what you choose to do with the budget that you've just freed up is entirely up to you.
Simplifying the tech stack at your company can be a daunting task depending on the scope and complexity of your organization. That being said, eliminating excess vendors can lead to major cost savings and major productivity increases for your organization. Me and my first-born guarantee that it’s well worth the effort. Just remember these 5 steps:
- Perform a vendor audit
- Categorize your vendors
- Survey your internal teams to determine usage
- Determine preferred vendors
- Eliminate excess vendors