With the increased focus on digital transformation initiatives and similar modernization efforts across the business landscape, many project teams have become quite proficient at engaging technology solution and implementation partners as part of their work. But while most of the traditional vendor risk management techniques still apply to this newer segment of providers, teams also need to be aware of some of the more unique aspects of working with technology vendors.
Beware vendor lock-in risks. The tendency of some technology providers to create walled gardens around mission-critical systems can leave your business in a lurch when you’re ready to grow, add features, or expand your integration horizons. If your primary solution doesn’t support the desired connection points or can’t deliver the new functionalities, then you may be stuck with limited choices—some of them likely unsatisfactory—for moving forward. For example, you may need to add a standalone point solution to support specific workflows. This route can usually address the immediate need but may severely limit your ability to optimize your operations. Will you be able to add automations such as transferring data between the old and new systems? Alternatively, you may find that your initial technology investment wasn’t well spent, and you now need to consider a system replacement earlier than expected. Vendor lock-in can also create unfavorable contract negotiation conditions if your company effectively has no leverage to go elsewhere if you don’t like the terms. Be diligent during the platform selection process to understand where you may be locked in and which options give you more choice.
Watch for vendor financial stability risks. If a provider in most other disciplines experiences a work stoppage due to financial troubles, such as a labor strike or closing due to insolvency, your team can likely find an alternate vendor to complete the work in a relatively seamless fashion. That isn’t the case with technology solutions, which are often supported by only a limited number of partners and even then you’re likely to encounter long lead times to secure a replacement with the necessary expertise and system knowledge. It’s critical that project teams conduct thorough due diligence prior to contracting with a technology solution vendor, whether the provider is the sole source for the software and/or hardware or not. Further complicating matters is the need to look out months or even years into the future to ensure your system and its users will continue to have access to support, security patches, software updates, and equipment refreshes so the platform’s usability will go on uninterrupted.
Proactively manage vendor data security risks. A technology provider is more likely to be granted access to sensitive information than almost any other type of vendor, and this heightened risk posture makes proactive data security management more important than ever. Data breaches are often the first concern when working with a technology provider, and rightly so. These unwanted events can harm your reputation, erode customer trust, and incur tremendous financial penalties in the form of lawsuits, fines, and lost business. But a breach isn’t the only area of concern. A technology solution provider that erroneously applies workflow changes within your production environment prior to testing, for example, could corrupt the information your business uses to do everything from process customer orders to prove compliance with key regulatory frameworks. You need to maintain data integrity throughout your technology project—from the early planning stages where duplicate datasets may be used to fine tune the system’s architecture and programming, to late-stage rollouts where live data repositories are fed into the platform to confirm proper function and monitor implementation performance.