Supplier Consolidation - What are the Risks? Wait, there are risks?

It is widely understood to be accepted best practice to consolidate your supplier footprint whenever possible. I take no issue in general with this principle and recommend implementing a consolidation strategy for your purchasing program. Supplier consolidation results in clear and tangible economic and administrative benefits including:

• Reduced hard-dollar purchase costs through increased purchasing power
• Lower administrative overhead
• Simplified and cheaper process automation 
• Improved compliance and in-policy procurement activity

And more. 

But what are the risks to vendor consolidation in the market data and information services space?

• Higher switching costs. This is a major issue with data feeds, indices, and banking platforms. In the event you have to switch, the extent to which you are consolidated with a single supplier for a given category will carry significant costs. You'll have to learn a whole knew system at the institutional level. You'll have to rejigger workflows, update marketing collateral, and modify your data governance setup. 
• Decreased negotiating leverage. What you gain in purchasing power can be offset, albeit partially, by decreased negotiating leverage when you renew your contract. Your supplier knows that you face substantial switching costs should you want to move to a competitor, and that will be baked into your price. What to do? I recommend keeping direct competitors warm to the possibility of substitution opportunities. Get them to agree to discounting to account for your switching costs such IT costs, lower productivity and workflow impact. Communicate to your incumbent that their competitor is willing to discount to mitigate switching costs. Never let a vendor think they're not working for your business!
• Business continuity risk - The risks to your business increase as you consolidate with a vendor. Unlike other indirect spend categories, information services are not easily commoditized or their goods fungible, so there's substantial latency in moving to another supplier. Mitigate this risk by including aggressive service level terms and economic and equitable remedies to you in the event of breach or failure to perform.
• "Assignment" risk. While unlikely, on occasion you may find that when a supplier is purchased by another entity, the quality of the service materially decreases. As with business continuity risk, be sure to have strong terms in your contract governing assignment scenarios such as termination for convenience. 
• Reputational risk - while rare, a supplier may suffer irreparable reputational harm that may affect your firm's reputation. While this is highly unlikely, it speaks to the general principle that you should do your due diligence with suppliers just as you would with customers.

As a rule, these risks are typically more than offset by pursuing a general policy of supplier consolidation. Yet it's worth keeping these risks in mind when you're consolidation your supplier footprint.