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Granting a Monopoly to your IT Suppliers

In Enterprise Architecture we are often fixated on standardization of technologies across our enterprise.  We publish standard technologies for services such as DBMS, Storage, Network as well as application services like workflow, reporting and reconciliation.

The rationale for standardization is pretty straight forward.  Diversity is costly.  Each technology product carries with is operational risks that must be managed.  There are legal and commercial relationships to be managed and operational and support costs for the platforms.

The down side of standardization

In this zeal for standardization though we might be blind to a few downsides of standardization.  Here are a couple:

  • Granting a Monopoly – through standardizing on a single vendor removes the competitive pressure on the vendor.
  • Concentration Risk – this is a term from financial markets that means too much of your risk exposure is concentrated in a single security or customer.  What happens when your standard supplier goes bust, which seems to be happening more frequently these days.

Bad things happen when you grant a monopoly

In your company it is no different than the broader economoy, when you grant a monopoly in a given sector, you eliminate the competitive pressure for a supplier to deliver quality and innovation.  You also put all your eggs in one basket.

What’s your view

Is this just too hypothetical? I’d like to hear other’s view on the topic.  So, please comment or direct me to your blog.

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