What to look for in a third-party vendor while cutting budgets

At the end of 2022, many companies (83 percent) feared a recession in 2023, with 60 percent of enterprise-level and 45 percent of SMB-level businesses preparing by tightening budgets, reducing non-essential spending, renegotiating payment terms and other strategies. Yet SWZD’s 2023 State of IT Report also found that over 50 percent of companies planned to increase YOY IT spending, with budgets expected to grow 13 percent YOY.

That same report indicated that 23 percent of companies had already implemented -- or planned to form -- strategic partnerships.

The growth mindset shows that companies are actively seeking to expand their tech stack and elevate their investments. If your company plans to partner with a third-party vendor, a proactive approach works best -- and includes asking questions that provide the necessary data and insights to make an informed decision.

Not sure if a new tool will streamline workflows or create more headaches because it doesn’t integrate with your existing software? Is a potential solution just a fancier (and more expensive) version of something you already have -- or will those bells and whistles actually improve operations?

The adoption of a new tech tool isn’t something to take lightly. To help facilitate your decision, ask the following questions during the vetting process.

Will the vendor solution integrate with your existing tech stack?

Many of us gravitate toward the latest, shiniest new thing -- and when you learn about a tool designed to make people’s jobs easier and improve operational processes, it’s hard to resist, right? As you weigh the pros and cons of introducing a third-party vendor to an existing tech ecosystem, determine whether the tool will integrate smoothly with what you already have.

A new tool should seamlessly integrate into the existing tech environment. A solution that "plays well" with what’s already there minimizes disruptions, smooths the adoption and onboarding process and facilitates a consistent data flow among any disparate systems in your tech stack.

The popularity of integrated networks has exploded -- with the integrated network economy expected to encompass 25 percent of the total economy (and generate $70 trillion in global revenue) by 2030. A robust integration enables data-informed insights and elevates decision-making by:

• Improving company-wide and interdepartmental data accessibility.
• Reducing data silos.
• Streamlining information sharing.

Will the vendor solution streamline and economize your existing tech stack?

Before vetting a third-party vendor, audit your existing tech tools to identify redundancies. You should also see what platforms each department uses, especially if teams have similar requirements. For example, sales and marketing teams may engage the same funnel but use two different platforms, which is inefficient and may result in data loss.

Sticking with multiple-point solutions, which can create disparate systems unable to communicate with each other and lead to inaccurate data, may be unwise, especially as your business scales. A growing business’s needs change, multiply and increase in complexity. Instead, consider investing in higher-value software capable of solving multiple problems -- and retiring extraneous tools.

By prioritizing tech consolidation, you realize many benefits including:

• Better aligned teams.
• Desiloed data.
• Increased operational efficiency.
• Reduced costs and higher ROI.
• Streamlined workflows.

Another benefit of consolidation? More innovation -- because fewer siloed systems empower your employees to explore and adopt other cutting-edge technologies -- and increased business agility and flexibility during change. It’s much easier to modify a unified system than grapple with a motley crew of systems.

Is now the best time for your company to purchase a new vendor solution?

Practice restraint even if you’re itching to connect with that third-party vendor. First, identify what process your organization has (or requires) to effectively onboard a new tool. Will your current tech stack play well with an advanced system designed to merge and work with what you already have? If your organization lacks the right internal processes or initial infrastructure, purchasing a third-party solution might create more issues than it solves.

For example, let’s say your marketing team wants to purchase a call-tracking tool for advanced analysis. If you don’t already have Google Analytics installed for running fundamental analyses, introducing an advanced tool could create confusion -- and more work -- for everyone.

Here’s a bonus question -- and perhaps the most important: Can your company afford the expense? Even if a new solution replaces current tools and eliminates redundant systems, will those savings offset any start-up costs and generate sufficient ROI? Ideally, a new tool shouldn’t just become another line item on the balance sheet. This tool must add value. Make sure you’ve evaluated all financial (and other) risks before signing on the dotted line.

Choosing a new third-party vendor may feel herculean and intimidating. But asking -- and answering -- these questions simplifies the process and positions you to select the appropriate tool that will benefit your company most.

Photo Credit: Shutterstock

Chris Todd, senior manager of demand generation, CallTrackingMetrics, is a professional digital marketer with more than a decade of experience in building and promoting brands. A digital marketing and social media expert, Chris earned his MBA from Univ. of Maryland’s Robert H. Smith School of Business.