The 9-Step MSP Checklist for Effective Vendor Consolidation

MSPs, you don’t need us to tell you that the last few years have been tough in terms of margins, profitability, and costs. Thanks a lot, inflation! With vendor costs and fees skyrocketing, vendor consolidation is now a key—if not the key— strategic focus for many MSPs. Datto’s State of the MSP 2025 report says 46% of MSPs are prioritizing vendor consolidation this year, with 63% saying they prefer working with fewer vendors.

Why is vendor consolidation on the rise?

Reducing the number of ISVs you work with can help you streamline your operations and improve your margins. According to AvePoint, 40% of MSPs work with more than 20 vendors. If you can cut that to two or three vendors without harming your service levels, you’ll significantly reduce administrative overheads for starters. There are plenty of other vendor consolidation benefits, too:

• Simplified tech stacks: Consolidation leads to more integrated and interoperable solutions, reducing the need for complex custom integrations and lowering the risk of compatibility issues, data silos and inefficiencies. It also reduces the need for specialized talent to manage individual consoles.

• Greater innovation with larger vendors: Larger, consolidated vendors tend to have more robust R&D budgets, so MSPs get access to cutting-edge technologies like AI-driven automation, advanced analytics, and zero-trust security frameworks.

• Improved vendor relationships: Dealing with fewer vendors can mean you forge deeper, more strategic partnerships with those you work with. MSPs can then be better placed to negotiate on pricing, gain early access to new features, and receive more personalized support.

But putting all your eggs in one basket also comes with risks. Let’s take a look:

• Over-reliance on a single vendor: On the flipside, depending heavily on one or two vendors can reduce flexibility and bargaining power, especially if the vendor experiences significant downtime, for example. The key is in the relationship building—and your SLA (more on this later).

• Less specialized solutions: Niche vendors often provide more tailored features than larger vendors. So consolidation might mean sacrificing these specialized capabilities.
  
• Downtime and vendor lock-in: If a consolidated vendor experiences an outage, the impact on your MSP’s service delivery will be magnified. Network downtime is expensive—estimated at $5,600 per minute by Gartner back in 2014. Additionally, switching from a consolidated vendor can be costly and time-consuming due to deep integration.

The vendor consolidation checklist for MSPs

Now you know the pros and cons, are you ready to press ahead with consolidation? Here’s our checklist to help ensure it works for you.

1.  Assess your portfolio

Take a step back and ask yourself, “What are we unhappy with? What’s costing us the most money and time?” This will help you focus on your bulkiest tools—and, in turn, help focus your search for a provider.

2.  Reliability and reputation

Look for vendors with a proven track record of uptime, performance, and customer satisfaction. Third-party analysts and specialized testing labs evaluate and rank top-tier solutions on the market, and give you an idea of the vendor’s area of expertise and appetite for innovation. Look for peer reviews and case studies too—they’ll tell you about ease of use, deployment, and integration.

3.  Scalability and integration

Ensure the vendor’s solutions can scale with your MSP’s growth goals and integrate seamlessly with your existing tools and platforms. Study the vendor’s vertical market—are they poised to expand? What’s on their product roadmap?

4.  Support

24/7 support, dedicated account managers, and responsive escalation paths are essential for mission-critical services. How quickly do they address bugs? What’s their lead time on releasing patches?

5.  Security

Vendors should comply with industry standards and offer robust security features like encryption, MFA, and compliance reporting. Make sure you study their prevention and response measures for security breaches.

6.  Cost

It seems obvious, but the cost of a one-stop vendor solution needs to be considered against the value it will add to your MSP and your clients. Consider the total cost of ownership, including licensing, support, training, and potential hidden fees.

7.  Ease of use

Solutions should be intuitive and simple to operate and maintain—if you need to hire people to implement it and run it, it probably won’t save you money. That said, larger MSPs, as well as those serving multiple regions, may require more advanced controls with customizable capabilities to ensure tailored protection, depending on the client.

8.  SLAs, contracts and exit strategies

Negotiate robust SLAs that define uptime guarantees, response times, and penalties for non-compliance—you can read more about navigating contracts and how to nail SLAs in our 7 Mistakes MSPs Make With Client Contracts article. Consolidation can also increase your leveraging power on cost, so use it to secure favorable pricing. And make sure you have backup options and an exit strategy—this will help you respond quickly if you need to suddenly switch vendors.

9.  Talk to your clients

As with any change to your service or MSP function, communicate it to your clients and reassure them. They’ll want to know there won’t be any impact on service while you consolidate, so taking them through the topline process might be helpful. It’s also worth highlighting the benefits to them—it could lead to more business, after all.

Careful planning and vendor evaluation is the name of the game with vendor consolidation. By focusing on strategic alignment, reliability, and long-term value, MSPs can turn vendor consolidation into yet another tool for growth.