Vendor Loyalty or Diversity?

Vendor Options

When I was in the planning stage of my company it became obvious early on that vendor selection was going to be an important task. I had some ideas about how I would go about this task, based on some personal principles.

I thought that keeping things simple and organised was a good foundation to use in my selection process. By extension of these principles, I figured it would be beneficial to try and narrow my use of vendors.

The idea was to use vendors that had a broad product range that covered many of my requirements. This would then reduce the overhead of managing lots of vendors and the complexity of learning lots of different platforms. Operational efficiency would surely be the result! Besides, I had seen one particular company do very well by being a ‘Microsoft only’ shop.

Now however, my mindset has completely changed. Just as initial business models need to be flexible and open to change, so did my thinking around vendor selection. I found through experience and research that this ideal scenario just didn’t work in reality.

Risk management

When researching a particular product I came across a news article about how one vendor had announced price increases upward of 300%. Then there was story of a vendor whose parent company decided that the venture was no longer worth their time and were shutting down. A whole range of vendors had also been bought out or merged, with various implications and outcomes.

The take away here was that being too reliant on any one vendor was a risk. If any of these scenarios were to occur to a vendor you relied heavily on, it could have serious negative impacts.

Specialisation

What also became apparent was that vendors with broad product ranges never excelled in all of them. From another perspective, those vendors who specialised in niche or narrow products generally had better products or better pricing.

This reason alone caused me to close down several vendor accounts early on and spread my requirements across more vendors. By nature of the fact that every company has finite and limited resources, those who specialise tend to excel relative to those who have a broad focus.

Vendor Loyalty

While it was true that I had seen some players in the industry do very well with single vendor relationships, my circumstances were different. In hindsight I can see why it worked for their business model and why it would be sub optimal for mine.

Why? Their scale and market focus was very different to mine. With their scale they would be getting economies of scale with the vendor (bulk pricing) that were not available to me. In one case the founders had been previously employed by the vendor, which obviously gave them huge technical and operational knowledge. Not to mention very close ties.

Also, when speaking with some in the industry I noticed that some had vendor loyalty based on biased opinions. Some for example, hate Microsoft. Which leads me to my last point.

Unbiased evidence based selection

The long story short of this lesson was, when it comes to vendor selection, base your choices on unbiased evidence. Typically this meant actually testing each product and seeing for yourself which was most appropriate to your needs. Yes, this is the most time consuming method.

While I did do some research and background reading on potential vendors, this alone was never sufficient. Dubious reviews, articles written with conflicts of interest and wildly varying and biased opinions don’t go far. What is best for others, may not be appropriate for you.

JS Bin