Why Software Vendors Shouldn’t Manage Your Entire Digital Transformation

One of the biggest misconceptions organizations face during digital transformation is believing their software vendor or system integrator can oversee and manage the entire project successfully. In reality, this assumption is a critical mistake, and here I’ll explain why.

My company Third Stage Consulting Group is an independent consulting firm committed to helping clients globally achieve successful digital transformations. While technology vendors and implementation partners play essential roles in these projects, their involvement represents only a fraction of what’s needed to manage a full-scale digital transformation.

Today, I’ll outline the critical aspects that must be managed beyond what your vendor can handle, emphasizing the value of program governance and the strategic oversight that an independent partner like Third Stage can provide. You can also watch my YouTube video on this topic:

The Scope of Digital Transformation Is More Than Just Technology

First, let’s address a fundamental truth: technology is only one piece of a digital transformation puzzle. Transformations generally include several key workstreams, from technology and software to organizational change management, process improvement, data integration, user acceptance testing, and more. The technology itself is often the most visible part—it's something you can see, test, and experience firsthand. However, the other workstreams, which may not be as immediately tangible, are often the determining factors of a project’s success.

Relying solely on a technology vendor means focusing only on one facet of a multi-dimensional project. Organizational change management, data integration, and governance are just a few of the non-technical elements that vendors tend to overlook. Unfortunately, neglecting these crucial areas creates significant risks, often leading to delays, cost overruns, and an incomplete alignment of the technology with the organization’s needs.

A Program, Not Just a Project

Digital transformations are complex programs, not isolated projects. While your technology vendor or system integrator will manage the implementation of a specific software, their work is essentially a project within the larger program. You’ll need a comprehensive program management strategy that includes oversight across all workstreams, aligning each to the project’s objectives and ensuring they integrate well.

At Third Stage, we offer services in program management that unify all workstreams under a cohesive strategy. This holistic approach ensures that digital transformations aren’t just technology implementations; they’re full-fledged organizational evolutions that reflect your current operational needs and align with your long-term business goals.

Misaligned Incentives Means That Vendors Can’t Be Trusted to Manage the Whole Project

A common issue when engaging software vendors for project management is the misalignment of financial incentives between vendors and clients. For software vendors, profitability hinges on getting you to buy and use the software as quickly as possible, thereby maximizing their subscription revenue. Similarly, system integrators often prioritize compressing the project timeline to realize their revenue as quickly as possible, which may result in the rapid staffing of projects based on an overly optimistic 18-month timeline, even if the project realistically requires 24 or 36 months.

For clients, the focus should be on project success, careful budget management, and risk mitigation. Vendors and system integrators are motivated to minimize project duration, which leads to rushed implementations and inadequate attention to essential processes like testing and change management. This disparity in incentives is one of the primary reasons projects frequently go over budget, as the vendor’s drive to front-load their revenue results in an accelerated timeline that does not align with the client’s needs.

This situation also often results in operational disruption at the time of go-live. For example, if your organization moves too quickly without thoroughly addressing the necessary change management or process refinement, you’re more likely to experience a chaotic transition, which can leave you worse off than before. By engaging an independent partner for program management, you can ensure that your digital transformation proceeds at a sustainable pace that prioritizes the organization’s success over the vendor’s immediate revenue goals.

Vendors Don’t Fully Know Your Business

Another key consideration is that vendors and integrators often lack a nuanced understanding of your organization’s unique needs. While these partners know their technology inside and out, they may not grasp your business strategy, culture, or risk tolerance, nor do they understand your organizational history and long-term goals.

Without understanding your current state, culture, and trajectory, vendors are more likely to focus solely on the technology and its intended future state. This approach leaves out critical factors that influence how well the new system will integrate with your organization. Just as you wouldn’t embark on a trip without knowing both your starting point and your destination, a successful digital transformation requires an understanding of where you’re starting from. Technology vendors are often ill-equipped to take this broader perspective, and this gap can undermine your transformation’s success.

Independent consultants like those at Third Stage bring an objective, comprehensive perspective that considers both your current state and your strategic goals, tailoring the digital transformation to fit your organization’s exact needs. Our approach balances technological expertise with business architecture and organizational alignment to ensure that the transformation reflects who you are and where you want to go.

The Non-Technological Factors That Drive Success

Transformations go beyond implementing new software; they involve a fundamental shift in how your organization operates. The technology, while central, isn’t what will determine the success or failure of the project. The real determinants lie in how effectively you handle change management, how well you define your future-state processes, and how closely the transformation aligns with your strategic objectives.

Vendors define success based on whether the technology works and whether they’ve fulfilled the technical scope, but for your organization, success is measured in operational terms: how efficient you’ve become, how the transformation has impacted your bottom line, and whether the project stayed on budget. With an independent program management partner, you gain a project strategy that balances technological deployment with business alignment, risk management, and cost control—priorities that often don’t match the narrow success criteria of software vendors.

Program Management vs. Project Management

When planning a digital transformation, it’s crucial to distinguish between program management and project management. Program management is the broader governance structure overseeing multiple projects, each with distinct objectives but all aligning with the transformation’s overarching goals. Project management, on the other hand, often applies to the individual initiatives, such as software implementation. Successful transformations require robust program management to ensure each project is executed effectively and aligns with the overall strategy.

If your organization has an internal PMO (program management office), you’re off to a good start. However, managing a complex digital transformation requires an understanding of the nuances of enterprise-level transformations. Some organizations might not have a PMO or the experience to handle this type of project. This is where an independent partner can provide invaluable support, bringing the expertise needed to build out a PMO function tailored to the complexities of digital transformation.

Avoiding Technology-Centric Pitfalls with Independent Program Management

One of the most significant risks of vendor-led digital transformation is the tendency to focus solely on the technological aspects, overlooking crucial areas that contribute to success. Independent program management keeps the project aligned with business objectives and addresses essential non-technical areas. It ensures that each aspect of the transformation is harmonized with the organization’s operational needs and goals, providing a 360-degree view that addresses both immediate and long-term requirements.

A key part of Third Stage’s program management offering is helping clients build and maintain control over their projects, keeping vendors and system integrators accountable while ensuring that each decision aligns with the organization’s strategic priorities. This hands-on approach allows the client to remain in the driver’s seat, guiding the transformation rather than merely reacting to it.

Conclusion: Making Your Digital Transformation a True Success

Digital transformations require a level of strategic alignment and oversight that goes beyond what any technology vendor or system integrator can provide. By relying on vendors to manage the entirety of the project, organizations risk falling into a technology-centric approach that may deliver software but won’t achieve the transformative business impact that a well-executed digital strategy can bring.

Independent program management from a firm like Third Stage Consulting ensures that each aspect of the transformation aligns with your unique goals, mitigates risk, and fosters sustainable, long-term success. This approach not only prevents misalignment and operational disruption but also keeps your organization’s interests at the forefront.

For those embarking on digital transformation, I invite you to read our eBook, “Lessons from 10,000 ERP Projects and Digital Transformations.” Here, we cover many of the best practices and lessons I’ve shared today, along with insights gained from helping hundreds of organizations navigate their own transformation journeys.

In short, while software vendors and system integrators are essential to a transformation, they are not equipped to drive the full-scale program management required to ensure a successful outcome. By partnering with an independent consulting firm, you can be sure your digital transformation is more than just a technological upgrade—it’s a strategic advancement for your entire organization.