As a company looking to engage external vendors for your data analytics needs, you can choose between a single or multiple vendor approach. Here are all the pros and cons of both the approaches that you need to know.
The Data Analytics Market is expected to grow at a CAGR of 30.08% from 2020 to 2023, which would equate to $77.6 billion. Data being a crucial game-changer today,
the execution of the data to insights journey with the purpose of gathering actionable insights has become extremely crucial for companies to score over competition. Hence, the spotlight is on actionable insights and how they align with the business priorities to become an integral part of their business and growth plan.
In the process of procuring analytics services, companies often face a dilemma of how to find the right partners and whether multiple vendor partners are required to meet their analytics needs. The selection of vendor partners in the analytics space largely depends on the solutions to answer the right business questions, the ability to deliver stable performance and storytelling capabilities. Let us look at the pros and cons that support a single vs multiple vendor approach in order to help pick the best strategy to suit your business. However, it is important to consider these points through the lens of the duration of the engagement with the vendor as short term business needs require to be managed differently compared to long term business needs.
Single Vendor Strategy : Pros
This strategy of outsourcing analytical needs to a single third-party vendor seems like the simplest way to delegate all analytical requirements. Some of the key advantages of this strategy are:
- Less Procurement Effort: Bringing in one trusted analytics partner reduces the effort to compare multiple vendor services and offerings. Less coordination is required and with a single account team, contracting, invoicing and legal negotiations become easier. Business can focus on structuring requirements from different stakeholders and not on managing multiple partner relationships.
- Accountability: Single account team on the vendor side ensures clarity in RACI (Responsible, Accountable, Consulted & Informed) and provides business with a SPOC (Single Point of Contact) to communicate with and simplifies the escalation
- Data Security: Customer data stays with a single vendor and it becomes easier to monitor all aspects of data security.
- Faster Training and Utilisation: With a single team responsible for providing analytics capabilities, training end users is faster. The business users are more familiar with the system and can be on-boarded quickly.
Single Vendor Strategy : Cons
While a single vendor approach has its advantages, there are some drawbacks in relying on one vendor. It is important to look at these as well before choosing the optimal procurement strategy.
- Isolation from Competitive Environment: You may lose out on competitive benchmarking of costs and deliverables in the longer run. Market benchmarking will become an additional activity required to remain cost effective.
- Slowing down of innovation: While a single vendor might be capable of delivering on all the analytical needs, customers might remain isolated from new and innovative techniques that come into the market, especially if the engagement with the vendor is on a long-term basis, then product innovation can become overly reliant on the vendor’s roadmap.
Multi Vendor Strategy : Pros
With varied business requirements and newer, innovative solutions coming up in the market, it is a good idea to look at how multi-vendor relationships can aid the business.
- Higher Level of Expertise: Several analytics companies are operating in niche sectors of business and can be utilised for short engagements to provide an edge over competition. Multiple vendors can bring in a variety of unique solutions to solve specific business problems giving access to the latest developments and innovations in the analytics world.
- Faster go-to-market: Development and design can go on simultaneously in several areas, enabling faster decision making to reach optimum actionable solutions.
- Ensures quality and cost optimization: A company’s strategy to hire multiple vendors for specialized services prevents vendors from getting complacent on quality of services. This also increases the client’s negotiating power both in terms of scope of services as well as cost.
Multi Vendor Strategy : Cons
While the above advantages might make a multi-vendor engagement seem like the perfect solution to outsourcing problems, it comes with its own drawbacks as well.
- Lack of Ownership: Managing multi-vendor relationships can be tricky and accountability can pose a problem. Clients may need more team members to manage multiple vendors effectively.
- Security: Sharing of data with multiple vendors can pose a greater risk of security and information leakage. Different vendors may also require data in different formats which can become time consuming.
- Program Management Office (PMO) Required: A very strong PMO is required to manage multiple relationships in all areas like project execution, invoicing, contracting, procurement and legal documentation. Constant monitoring and follow ups through collaboration tools become necessary.
Some experts may argue for a single-vendor approach to ensure a reliable and smooth operating environment and the value it brings with having a complete solution on a single platform. Another school of thought advocates a multi-vendor approach promoting a flexible and innovative working environment and staying up-to-date with the market. Every business needs to consider the pros and cons and their own requirements to gauge the best approach that suits their needs.
To help you find the right vendor or mix of vendors, trust a partner like Analytics Genie who will showcase the strengths and connect you with the right partners, while giving you access to the global Data Analytics marketplace.