However, there are a few red flags I overlooked in our process that I hope can shed enough light for you to learn from our mistakes.
Managed Service Providers (MSPs), or IT support companies, operate in a double-edged sword environment. We have access to some of the most advanced and capable software solutions to deliver services and solutions to our clients. In fact, it is estimated that most MSPs leverage between 20 and 40 different software solutions in their daily operations. While this exposure to incredible new technology can drive efficiencies for our clients, it also means we must keep up with the rapidly evolving solutions available. To complicate matters, ensuring all software solutions can integrate and communicate effectively is crucial to get the most value out of "the stack."
Because software vendors gain significant exposure to a larger client base through technology solutions providers, there is a strong focus on delivering software that brings immense value. New vendors seem to appear almost daily, often fueled by private equity investment groups and other large funding sources.
Three years ago, we decided to move our two main software applications to a new vendor that promised innovation and integration through a single-vendor approach. This seemed ideal—a single company combining software and integrating it tightly to be more efficient and powerful.
Shortly into our journey with this new vendor, we discovered that one of our other major tools had also been acquired by them. This acquisition likely meant great innovations and integrations, or so we thought. Fast forward two and a half years, and we found ourselves with almost 80% of our software under a single vendor—not by choice but due to the vendor's aggressive acquisition strategy. But let's step back and walk through some of the red flags.
Six months into the relationship, one of their software tools experienced a major cyber breach affecting over a million endpoint devices. Fortunately, we did not use the affected version of the platform. Nonetheless, it caused significant concern among our clients and their insurance carriers. Thankfully, our layered cybersecurity approach helped mitigate potential risks.
About a year into the agreement, another tool we used was also acquired by the same vendor, further entrenching us with them. Despite promises of "tighter integration" and "more features," we experienced the opposite—basic functionalities like notifications stopped working. Instead of gaining features and functionality, we lost them and ultimately lost confidence in the platform.
When we were a few months out from our auto-renewal of the 3-year contract we started seeing more signs of the paint coming off of what was once a shiny exterior painted to impress. We gave notice that we did not intend to renew some of the tools we had been paying for but never used. Their response claimed our notice to terminate was 29 days instead of 30, requiring us to continue paying for another 3 years. We disputed this claim, as there were 31 days in the month, making our notice timely. Mind you, this renewal was for a tool that we had paid for each month for the last 3 years, but had NEVER used!
Next, we examined the contract language in detail and discovered a clause updated since our original signing. This clause stipulated that in the event of early termination, we would turn over our client records and assist the vendor in transitioning our clients to one of their other partners. Our attorneys advised against renewing with these terms. Despite requesting modification, the vendor denied our request. (After delaying us for an answer for almost a month) Their assurance that they would never exercise this clause did not alleviate our concerns—if they wouldn’t exercise it, modifying the agreement shouldn’t have been an issue.
This was our breaking point. We could not agree to those terms or expose our clients to those risks. We decided to move away from all tools and solutions with this vendor, requiring months of engineering time and expensive consulting hours. This upheaval impacted several of our quarterly and annual goals.
In the end, this move proved transformational for our organization. We chose separate vendors to avoid placing all our eggs in one basket. We selected vendors committed to innovation, integration, and open APIs. Ultimately, this put us and our clients in a much better position.
Understand Your Vendor's Structure and Vision: Before choosing vendors, ensure you understand their current structure and long-term vision. Are they privately held? For how long, and by whom? Do they plan to expand, go public, take investments, or exit? These key questions can save significant work in the future and are now required for any new vendor we evaluate.
Review the Impact of Vendor Consolidation: If a vendor consolidates through acquisition, review how it affects your operations and business. Ask hard questions to fully understand the impact and create milestones for the transition. Never get too comfortable with more than one product or service from a single vendor. Vendors know the pain of switching solutions deters clients and may exploit this.
Know Your Agreement Terms: Familiarize yourself with the terms of your agreements, even online service agreements. Many people accept terms without reading them, missing critical clauses. Review these agreements carefully to avoid unpleasant surprises.
Seek Innovation and Open APIs: Look for vendors leading in innovation and offering open APIs. With AI advancing rapidly, investigate whether new features are genuinely innovative or just marketing hype. Check how quickly new features are released and compare the promised roadmap to actual deliveries. A vendor lacking open APIs or providing poor documentation is a red flag.
Make Hard Decisions When Necessary: Don't fear making tough decisions about changing vendors if you have concerns. Vendors often count on your reluctance to switch and may exploit this. Push for solutions and tangible resolutions. If a vendor fails to address your concerns, have the courage to make the change—it may be difficult, but it's essential for long-term success.
By following these lessons, you can avoid the pitfalls we experienced and make more informed decisions about your technology vendors. If you are in the process of choosing or consolidating vendors, let us help you with the lessons we have learned. Schedule an appointment with us to learn more about our IT business audits.