There are thousands of companies in every market segment. Some stand out thanks to their size and history, and others are not so well known but offer exceptional client service combined with high-quality niche services. But which one should you choose as your vendor? The answer is simple:
Both of them.
Small and big organizations will supplement each other, and you will get better results from them. This article will explore the pros and cons of a multi-vendor model and where it works best.
When you should consider a multi-vendor strategy
Working with several companies that support different areas of your business is a popular thing to do. After all, it’s a strategy that gives you more stability. When relying on a single vendor, you must recognize that not all of your company’s needs will be satisfied. Every organization with a vast range of services, a robust infrastructure, or just operating in various locations should look for a network of trusted advisors who will support them. The multi-vendor approach works best for:
Organizations that employ thousands. Huge enterprises have a lot of resources in-house, but that doesn’t mean they have everything. Some experts don’t want to work with such companies because they don’t like the environment or prefer more flexibility. When those businesses require niche skills, a specialized partner can show up to take care of the project and leave when it’s done.
Global companies. The largest enterprises in the world are usually present in more than 10 countries and have a strong brand that attracts talent. However, smaller countries won’t have a big enough talent pool for your company’s needs. Then, relocation becomes a must. But this process is often time-consuming and complicated. Having a few vendors that will support you in relocating talented people from various locations can save you a lot of time and money. It’s also a way to create a win-win situation for you and the employees, as many people want to relocate but are afraid of finding work.
Organizations that invest in their workforce. Before you invest in technology, you should always invest in your people. A happy and motivated workforce will immensely impact your company’s growth. Consultants and coaches can help your employees in developing their skills. But one company can’t employ all of the finest mentors. That’s why having a network of specialized vendors means better access to the best trainers for your organization.
Fast-growing companies. The rapid growth phase is always a clue that you should start looking for additional vendors. It’s not only about keeping up with the demand for new employees but also about standing firm in the face of organizational transformation. When new challenges arise daily, having various partners with the appropriate know-how can save you a lot of trouble. Maintaining your company culture during a growth period is more demanding than most think.
Organizations with many departments. Some departments get more attention than others. It’s normal, but it also creates friction inside the organization. That’s why sometimes it might be a good idea to outsource the whole process of establishing a new team. The Build-Operate-Transfer model is perfect for such cases. Choosing it will ensure new employees are well aligned with each other as well as the company. Only a couple of people from your company will be involved in the recruitment process, and they will work with outside experts who have just one goal - establishing a capable team that knows how to work together.
Companies that invest in new technologies. Small projects are easier to manage, but some new tech projects require extensive teams. When you make a massive investment into a project, it shouldn’t be put on hold just because the team is missing one core skill. Working with several vendors will help you to start projects faster. All you have to do is share the job requirements with all of them, and someone will find the appropriate candidates.
It’s important to note that small and medium businesses should also look into this model, although the big enterprises will surely reap greater benefits. After all, managing multiple vendors can be time-consuming, and being a small company usually means you don’t have a dedicated employee who can handle the meetings and oversight in your place.
Advantages of a multi-vendor model
The best advantage of a multi-vendor model is that you have a network of reliable providers. You know who to reach out to if something unexpected happens, and each provider does their best to keep you happy. Vendors understand that there are other companies like theirs. They know that to keep you as a client, they must provide solid results. But having multiple technology vendors also means:
You have access to the best talent. Top talent is spread across various organizations and locations, but vendors put a lot of effort into attracting them and keeping them satisfied. With multiple partners like that, you’ll be able to create a team of experts no matter how niche the requirement is.
Your teams can focus on things that matter most. Your employees shouldn’t take care of mundane work that doesn’t bring value to your company. Contracting tasks like these out to a different company is usually very easy. A good vendor will find the solution you need so you don’t need to invest time and effort into low-level planning.
Projects start faster. Nowadays, you have to innovate fast. Trends quickly fade, so making profits from them requires people who know how to guide your company through them. Hardly any people have the skills to apply new tech to a mature organization but there is a good chance one of your vendors has an expert like that on board.
Operations costs are lower. Keeping a part of your operations outside limits the need for internal resources. Your vendor can handle team management and reporting if you include it in the SLA.
You have access to unique market insights. It’s one of the greatest advantages a multiple-vendor model brings to the table. All your partners have their own distinct insights as they work with various companies and industries. And when you expand your business, all that information can be useful and even save you from making a wrong move.
High availability. The more vendors, the more possibilities. Your partners will probably want to expand alongside your company. This means they will do their best to prove you can count on them. Most of them will be ready to take on a project as soon as possible.
You can solve problems faster. Obstacles can arise at any time, and you can’t avoid all of them. But you can solve those issues faster with the unique expertise of your trusted advisors. For example, if one of your vendors handles the project and stumbles on a problem they can’t solve, a different one can come in to calmly examine the issue and propose a solution.
More flexibility. More often than not, one vendor won’t be able to provide every employee you need. But with multiple partners, you’ll be able to add talent from other companies to ensure the project starts on time.
Your organization has an exit strategy. Vendor lock-in doesn’t exist if you work with several partners. If one vendor didn’t deliver on the promised value, you can easily terminate the contract and hand the project over to someone more capable.
Range of offers. Everybody wants to have a choice. Multi-sourcing means you will receive enough offers to pick the one that has the best price-to-value ratio. Make sure you understand why one vendor has a higher price than the other.
Better services. It’s easy to compare vendors against each other if you regularly work with a number of them. You can effortlessly benchmark their services. And ditch the ones who fail to deliver.
New strategies. Your trusted advisors may notice new possibilities faster than you. If you build a long-lasting partnership, there is a good chance that your vendor will suggest valuable ideas to help you stay ahead of your competition.
You are future-proof. Building relationships is what business is all about. Having good relationships with your favorite vendors brings value over time to your company and you personally. For example, if you ever decide to start new endeavors or decide to change jobs, you’ll already know who you can count on.
All vendors want you to stay with them and will always do their best to deliver. But not all vendors can become your trusted advisors. So work with a number of companies, learn about them, and pay attention to things they excel at. Consider if you enjoy working with them. Some companies won’t be a right fit, and you’ll learn about the cons of having multiple vendors.
Disadvantages of a multi-vendor strategy
Having multiple vendors brings more pros than cons, but the cons are often frustrating. It's certain that not everyone will deliver on their promises, and you will have to deal with it. Being aware of those challenges will help you in dealing with them. From our experience, implementing a multi-vendor strategy may lead to:
More administrative work. Managing many vendors can be challenging at first, especially if a few companies work on one project. Your staff will have to get used to this and learn new management skills. But good partners will do their best to make this process easier for you.
You will have to find the right partners. That’s one of the biggest challenges because finding a trustworthy partner who consistently delivers is a long process. You have to find vendors, work with them for at least a few months and then decide who is the right fit and to who you must bid farewell. At Maxima, we focus on long-lasting partnerships based on trust, and one of our largest clients has been with us for over 20 years.
Information sharing may be more complex. Sharing all information across different organizations requires more time and is challenging if you don’t have the right system in place. Some vendors will have a client portal that you can use, but you also have to create fool-proof processes and work on aligning vendors.
Higher costs for contract negotiation. Negotiations are time-consuming, especially if you negotiate with a few parties. And time equals money, so you have to remember that this investment should pay off during the project.
You will have to transfer internal processes. To reduce the amount of work you must do, you’ll have to choose which processes should be handled by the vendor. Often, projects get delayed because a few companies have to go back and forth. Situations like this result in frustration, and some candidates resign. Giving vendors the power to handle 90% of a process for you will significantly improve their time to delivery.
Smaller projects reduce bargaining power. Having one vendor means you save through economies of scale. But in a multiple vendors strategy, you don’t have this leverage. One vendor with 500 people at your company will be much more likely to give you a discount than 10 vendors with 50 people.
Nobody wants to face the above mentioned challenges - that’s why some companies look into a sole-vendor model. If you want to learn more - check out our article about it to compare the pros and cons of both.
Having multiple vendors is worth it
Working with multiple vendors has a lot of advantages, but it also comes with some challenges. To make this strategy work well, you must create a plan, invest a lot of time to find the best partners for you, and patiently build good relationships. But it is the only way to future-proof your organization and deliver high-quality services over a long period. In the next article in this series, you’ll learn what to do to make this strategy as efficient as possible - and how to choose the right vendor.
It’s worth working with specialists who know how global organizations operate. At Maxima Consulting, we know the ins and outs of both North American and European businesses. We have helped them with improving their IT environments since 1993. Contact us to see how we can help.