Will the vendor consolidation trend last? MSPs are increasingly latching onto the one-stop-shop approach for vendor services, thanks to attractive offers from large vendors that claim consolidation will simplify and streamline their operations.
While this holds appeal for some MSPs, others are uncomfortable about putting all their eggs in one basket.
“While consolidating services with a single vendor has streamlined our operations and improved integration, it has also required careful consideration of the risks,” observed Corey Kirkendoll, president and CEO of 5K Technical Services.
“There are some obvious upsides to consolidating services under one roof,’’ said Chris Barber, chief nerd, Cheaper than a Geek. “For one, it simplifies management—you’re not juggling multiple vendor relationships or dealing with compatibility issues. Everything is more cohesive, and that can really streamline your operations.”
Often, when an MSP works closely with just one vendor they will get better service, he noted. “They know your business, and you can usually negotiate some pretty decent terms.”
Considerations When Choosing a Single Vendor
When thinking about whether to go with a single vendor, MSPs should carefully evaluate the following criteria, Kirkendoll said:
- Reliability: The vendor’s history of consistent performance, uptime guarantees, and service level agreements (SLAs) should be a primary consideration. This includes assessing their infrastructure and data redundancy plans.
- Scalability: It’s important to ensure that the vendor can support your business’s growth. This means their services should be flexible enough to handle increasing demand without compromising performance. Also, consider how easily additional features or services can be integrated as your needs evolve.
- Support: The quality and availability of the vendor’s support services are crucial. Look for vendors offering 24/7 support, quick response times, and a knowledgeable support team. It’s also beneficial if the vendor provides a dedicated account manager to ensure personalized service.
- Security: With the increasing importance of data protection, MSPs should assess the vendor’s security measures, including compliance with relevant regulations and their ability to prevent and respond to security breaches.
- Cost: While not the sole factor, cost should be weighed against the value provided. Transparent pricing, including any potential additional costs for scaling, is essential.
- Vendor Reputation: Check reviews, case studies, and customer testimonials to understand the vendor’s reputation in the market. It’s also helpful to assess how long they’ve been in business and their track record of innovation and service continuity.
“Reliability is a no-brainer,’’ Barber agreed. “You want to make sure the vendor has a solid track record—nobody wants to deal with unexpected downtime or security issues, especially when it affects your clients.”
Like Kirkendoll, he said scalability, 24/7 support, and cost are the other big factors. “As your business grows, you need a vendor that can grow with you. You don’t want to get stuck with a provider that can’t keep up as your client base expands or as their needs get more complex,” Barber said.
Integration capabilities are also key. “It’s important that whatever you choose plays nice with the tools and processes you’re already using,’’ he said.
Will Ominsky, vice president of MSP sales at Nerdio, said it’s equally important to evaluate the vendor beyond their products.
“Key considerations should include the vendor’s culture, leadership, pricing history, community involvement, and support quality,’’ Ominsky said. “Understanding the founders’ experience, their alignment with MSP needs, and their participation in relevant spaces and events is crucial.”
MSPs should also assess the vendor’s product roadmap and bug resolution efficiency, he said.
Benefits/Potential Risks of Consolidating Services With One Provider
Working with a single vendor allowed 5K Technical Services to simplify its management processes, resulting in faster issue resolution and more cohesive service delivery, Kirkendoll said. “The consistency across tools and platforms was a major advantage, making it easier for our team to manage and maintain our systems.”
However, the team was “acutely aware of the potential downsides. Relying heavily on one provider does create a level of dependency that can be risky,’’ he cautioned. If the vendor were to experience significant downtime, face security issues, or raise prices unexpectedly, our operations could be adversely affected.”
To mitigate this, Kirkendoll took steps to ensure that their vendor had robust SLAs and a solid reputation for reliability. “We also maintained backup options and a clear exit strategy, allowing us to respond quickly if we needed to switch providers.”
One of the biggest risks of the single vendor approach is vendor lock-in, Kirkendoll, Barber, and Ominsky all said. “If you put all your eggs in one basket, it can be tough—and expensive—to switch providers down the road,’’ Barber said. “And if that vendor has a major hiccup, your entire operation could be at risk.”
“Some vendors may make it challenging to switch to another provider by using proprietary technology or long-term contracts,’’ added Kirkendoll. They may also raise prices over time, and if you’re heavily dependent on them, switching could be costly and difficult.
Minimal lock-in benefits both parties, Ominsky said, because it offers MSPs flexibility and encourages vendors to maintain high customer satisfaction. “Vendors who are transparent and flexible empower MSPs to make informed decisions, ultimately strengthening their relationships.
There is also the risk the vendor will be bought out by another company. “Suddenly, you might be dealing with a completely different culture or leadership team you’re not thrilled about,’’ Barber said. “It’s happened before, and it’s a real concern.”
The Bottom Line: Vendor Consolidation
While Kirkendoll said his firm benefited from the efficiency and simplicity of consolidating services, “we were mindful of the need to balance these advantages with a risk management strategy to avoid the pitfalls of “putting all our eggs in one basket.”
MSPs must weigh the pros and cons and decide whether the approach will be beneficial for them.
“We’ve benefitted from tighter operations and better relationships with our vendors,” Barber said, “but we’re also careful to keep some alternatives on hand–just in case we need to make a quick change.”
Images: iStock
For more insight on rightsizing your vendor stack, check out Supporting SMBs Through Consolidation: Streamlining IT with MSPs by JumpCloud co-founder Antoine Jebara.
