Why software vendor consolidation is more critical than ever: Cost savings, security and efficiency head the list 

Ross Pounds

Pundits can debate the definition of “recession,” but senior leaders who’ve been through the 1991, 2001 or 2007-09 recessions will tell you the conditions feel familiar: We’re likely headed for rough waters.

Inflation, layoffs, debt ceilings, a war in Ukraine, tightening credit, shrinking consumer cash reserves and regional bank tremors provide more than enough evidence that corporations need to prepare for leaner times.

What is the common factor among organizations that successfully weather the storm? They figure out how to reduce costs without diminishing quality, productivity, or exposing themselves to undue risk.

One of the more effective strategies to thread this needle of cutting back without slowing down is through vendor consolidation, which is simply reducing the number of suppliers you engage with the intent of enhancing value received and streamlining vendor management tasks.

An important practice across all disciplines

The tendency during periods of rampant growth is to let teams run wild, buying the things they need and adding staff to get work done — with little attention paid to redundancies. Between broader trends of technology proliferation and the incredible speed and ease of deploying web- and cloud-based tools, vendor sprawl has accelerated in the past five years.

Inefficiency begins to seep in as business units strike deals with multiple software suppliers, which slowly turns into a flood of duplicative and wasted spending. In addition to acquisition costs, deploying siloed and redundant software and systems creates:

  • Integration headaches
  • Security gaps
  • General strategic misalignment across the enterprise

But in bull markets, these problems are generally overshadowed by enthusiasm over fast growth.

When the business cycle inevitably brings signs of a slow-down or recession, these redundancies and cost inefficiencies start to jump off the balance sheet.

And that's where we are today: Company leaders are looking to tighten up without slowing down by moving to a smaller number of vendors — especially in the digital realm, where one-off software and point solutions tend to accumulate.

GRC: A high-value target for vendor consolidation

Vendor consolidation has traditionally focused on areas like engineering and product development — which are undoubtedly important from a productivity perspective. Yet one of the best opportunities for quick-win and high-value consolidation exists within governance, risk and compliance (GRC). GRC has seen rapidly growing demands for data-driven reporting and insights — and a corresponding sprawl of point solutions and redundant and often outdated systems.

Consolidation in GRC technology can deliver immediate and wide-ranging benefits:

  • Cost savings: Consolidating software vendors can help reduce procurement costs by eliminating redundant services, minimizing transaction costs, and opening the door to package deals or volume discounts.
  • Time savings & efficiency: Working with fewer vendors simplifies procurement processes, reduces administrative burdens, and improves the overall efficiency of people charged with selecting and managing vendors. Also, consolidating on one platform simplifies training and improves productivity for everyone who uses the software.
  • Enhanced partnerships: Consolidating with a single vendor leads to special “valued customer” treatment, which may include better pricing, improved delivery times and SLAs, and customized offerings. In the case of software platforms, larger customers often get a seat at the table when vendors are planning their innovation roadmaps.
  • Improved risk management: By reducing the number of vendors, companies can better manage supply chain risks and increase cyber risk resiliency, mitigating disruptions to production or delivery.
  • Control: Consolidating vendors results in greater control over procurement processes, enabling organizations to set standards for quality, reliability, and responsiveness.
  • Increased agility: Working with fewer vendors enables companies to adapt faster to shifts in customer demand, respond to supply chain disruptions, and build out new workflows to meet evolving needs.  

Hidden benefit: Closing security gaps

While inflation, customer budget reductions and other economic headwinds erode topline revenue, benefits like product discounts and efficiency gains tend to get the most attention because of the urgency surrounding cost control. But one benefit that’s increasing in importance transcends the need for short-term savings: Security.

The harsh reality is that cybercriminals are typically better funded and more technologically advanced than digital security teams inside the organizations they attack. They continually develop tools and methodologies that identify vulnerabilities in digital ecosystems.

Every time a company integrates a new software product or platform, that integration creates a new potential vulnerability or entry point for bad actors. Even more dangerous, though, is the expanded risk of compromised credentials. As employees juggle more and more passwords for multiple software products or platforms, the risk of poor credential management/hygiene (i.e., not maintaining strong passwords) and other password compromise risks increases.

Consolidating to gain better visibility

Above and beyond the cost efficiencies and security benefits, consolidating on a single GRC software partner or platform is a smart strategy to address the rising challenges and demands facing GRC teams today.

Whether it’s compliance reports or assembling board presentations, GRC teams feel more acute pressure to deliver accurate and timely information to business leaders and boards. At the same time, the scope of that information is significantly expanding to include important new considerations, such as carbon accounting and diversity, equity and inclusion (DEI) — increasing both the volume of data required and the scrutiny that’s applied to that data.

Using disparate systems to collect, analyze and report enterprise data not only requires inefficient, labor-intensive manual workflows; it often results in inconsistent, incomplete or inaccurate findings. This, of course, can lead to regulatory fines, shareholder dissatisfaction and brand damage. It can also result in senior leaders and board members being presented with a flawed view of the enterprise, which can impact decision-making.

Effective GRC tech consolidation solves these pain points. GRC teams get a single source of truth for confident, centralized visibility. This not only increases trust in data integrity,it accelerates the speed at which reports and insights can be extracted from all this data. GRC teams can leverage their consolidated corporate record to respond to business needs faster and deliver better insights to leadership, more quickly, with a lighter lift.

A proven process for successful vendor consolidation

Businesses that wait until economic conditions force their hand will struggle to move fast enough. Many forward-thinking business leaders are already honing their strategies for tightening up without slowing down.

Ready to evaluate your vendor consolidation opportunity? Here’s how you get started: Read the next article in our series on the five essential steps you need to take to successfully consolidate vendors to drive savings while enhancing business intelligence.

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Ross Pounds
Ross Pounds, a Senior Manager at Diligent and expert in ESG, also has deep experience in governance, risk, audit and compliance. Ross has done extensive work on how organizations can prepare for climate accounting regulations and best achieve sustainability and diversity goals.