How do I check a managed IT provider’s reliance on one software vendor?
Map the provider’s tools and sort them by how much revenue runs through each. Where one vendor supplies the monitoring, security or licensing for most clients, ask what its partner terms say and what happens if prices or terms change. Concentration is a risk you can plan around once you can see it.
Ask the seller for the full list of vendors and tools, with the monthly cost of each and the number of clients that depend on it. Many managed providers resell licences and earn margin on them, so ask how much of the revenue comes from that resale. If a single vendor accounts for a large share, ask how that was negotiated.
Read the partner agreement with each main vendor. Check who holds the account: the business or a person. Ask whether the vendor can change pricing, drop the partner programme or restrict reselling, and whether the agreement transfers to a new owner. Your lawyer should review those terms.
Look at the skills in the firm. If the team is certified in only one vendor’s products, switching could take a lot of retraining. Ask whether the seller has ever considered an alternative and what stopped them. Finally, ask clients’ views: some like the vendor and others only tolerate it. If a vendor change is needed, ask how it would be done without disrupting service. Ask for the last few renewal notices from each main vendor, so you can see how prices have moved. A pattern of steady increases tells you whether margins are already under pressure.
Key takeaways
- List every vendor with its cost and the clients that rely on it.
- Check whether partner agreements transfer to a new owner.
- Ask how long a switch would take and what it would involve.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 03Business Development Bank of CanadaGovernmentHow to diversify your supply chain
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