Vendor loyalty under pressure as enterprises cut costs, consolidate

Peter Dinham
Sunday, 12 July 2009 06:55

IT Industry - Strategy

There’s a growing trend in the Asia Pacific region for enterprises to consolidate their software portfolios as businesses continue to grapple with ways to reduce costs and complexity during tough economic times.

According to a new report released by Springboard Research,  there is a trend towards convergence and consolidation around the platforms of what it describes as a group of ‘mega vendors’,  with more than 70% of enterprises looking for ways to consolidate their enterprise software portfolio within the next three years.

Springboard’s Michael Barnes, VP of software research, says the primary drivers for improved software portfolio management all link directly to reducing costs and complexity, and, given the weak economy – both globally and across the region – he expect this to remain the case for the next 12-18 months, and possibly longer.

According to Springboard, the ongoing consolidation in the enterprise software market will likely continue, with an overwhelming majority of organisations considering between 1-4 vendors to be ‘strategic providers’, critical to their ongoing operations.

The primary criteria for vendor selection are depth and quality of functionality, says Springboard, and it’s rated as most important by enterprises, just ahead of local presence and price.

However, it seems that loyalty to vendors is under pressure, with less than 40% of organisations across the Asia Pacific considering their existing software vendor relationships when undertaking architectural planning or making purchase decisions.

Springboard reveals that the majority of organisations make architectural planning decisions based on factors other than existing investments (e.g. sunk costs) or existing vendor relationships.
 
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